Is real estate past the bad patch? Slew of govt measures promises turnaround

The Indian real estate sector has been struggling with cash shortage caused by the demonetisation drive of November 8, 2016. There is a sense of confusion among investors regarding the growth prospect of the sector. When the realty sector will come out of slowdown is always a subject of much interest and debate, particularly post demonetisation. With re-monetisation by RBI, the liquidity issue seems to have been addressed and it is now about confidence on the sector among various stakeholders.

Now it seems that wait would be over soon.

With the government’s continuous push towards making housing more affordable, it is adding a new dimension to the sector. Various initiatives undertaken by the government at the Centre – such as introduction of REIT, the Real Estate (Regulation and Development) Act (RERA) and GST – to name a few – are expected to bring back cheer among the realty players across segments.

The government has also allowed 100 per cent FDI in real estate projects within the special economic zones (SEZ). It is believed this move will not only help ease the slowdown in the country’s realty sector, but would also have a ripple impact on the entire economy.

The Indian real estate sector has attracted significant investment over the past few years due to rapid urbanisation, positive demographics and rising income levels.

The improvement in the realty sector is expected to lift the construction industry, which has been facing pressure due to the downtrend in the real estate sector. With increased public investment in transport and urban infrastructures, power transmission and water and irrigation projects, it is expected that the sector would get the much-needed boost.

Moreover, the recent measures taken by the government to revive the construction sector by putting in place a mechanism to release funds stuck in arbitration awards and revive stalled projects is likely to strengthen the construction sector. The government has also promised a scheme to address stressed loans in this space. The push for affordable housing and low home loan rates also augur well for the sector.

Both RERA and REITs would be game-changers for the real estate sector. With RERA and REIT, the industry is poised for positive growth, which will bring more developers and investors to this space. The construction sector would get a lot of benefit from it. Companies such as Ashoka BuildconBSE 0.83 %, PNC Infratech, Ahluwalia ContractsBSE 0.16 %, Man Infra, Dilip Buildcon and DLF are expected to see good growth going forward.