No Real Estate Blows after GST, Note Ban

The Goods and Services Tax (GST) and Demonetization have been the two big blows to the real estate industry in India. But a feeling of optimism has been offered by some of the real estate developers in Bengaluru with high stock prices for around 12 months.

The crackdown of the government on unaccounted amount of money due to note ban in November 2016 eaten up most of the cash and has caused the first blow to the sector, which is based mostly on cash transactions. Along with GST rollout a few months later, potential buyers were forced to hold up for a year or so. When the share of unsold stocks stood 25% in Bengaluru as on March 2017, it has seen improvements in later months. The share of unsold stocks dropped by 16% from July to September from a year ago, according to the data revealed by Anarock Property
Consultants.

Homebuyers got the authority to ask developers to plan layout, sanctions, documents, and approvals from authorities by the Real Estate Regulatory Authority Act, 2016. Hence, they got more comfortable in real estate investment. When developers in other major cities in India shrunk the sizes of home because of soaring prices, home sizes remained unaffected in Bengaluru. With average sizes of homes reduced by 12% to 21% last year in most of the big cities, the reduction was just 2% in Bengaluru.

According to a leading real estate developer in the city, it reflected least impact of RERA and GST on home buyers in the startup capital and technology hub of the country. He added, “Most of the homebuyers are IT professionals in Bengaluru. They take loans to buy houses. So, both policies haven’t impacted the realty sector strongly in the city.” The developer appreciated GST and RERA and said that the policies would be beneficial to the builders in the long run. He added, “Buyers have been worried on investing on the houses. But industry seems to stabilize in a year.”
According to “Bengaluru – Opportunities in Challenges” report released in November by Jones Lang LaSalle, a property consultancy firm, despite these uncertainties, real estate will boom.