Realty in Mumbai in 2018: MahaRERA and GST keep prices high, sales low

The year 2018 was one of transition for the realty sector as goods and services tax (GST) and Maharashtra Real Estate Regulatory Authority (MahaRERA), introduced a year earlier, made their impact on the industry.

The slowdown in the realty sector continued, though sales improved marginally after October. There was no revival in the sector though with the non-banking finance companies (NBFCs) crisis towards the end of the year further affecting investments.

The homebuyer stayed in focus as builders tried to woo them with sops like price cuts and incentives as well as flexible payment options to buy homes. Builders also did not venture into luxury houses and instead focused on creating small, compact affordable houses, aimed at the budget homebuyer. Despite this, there was no major price correction in the sector.

According to Anuj Puri, chairman of the property consultancy firm, ANAROCK, 2018 was a transitory phase.

“Though MahaRERA and the GST were unveiled in 2017, the real effects were felt in 2018. Builders were complying with the conditions for major part of the year. After that in the end of the year, it was the NBFCs crisis, which acted as the dampener,” said Puri.

NBFCs are major financiers in the realty sector apart from the banks. However, indiscriminate lending and liquidity issues plunged NBFCs in crises due to which lending was curtailed significantly, putting the builders in a tight spot.

Ashok Mohanani, vice-president of National Real Estate Development Council (NAREDCO-West), a leading body of builders, agreed with Puri.

“The 12% GST is a dampener as it tends to spoil the entire budget of the homebuyer. In addition, funding was a big issue, which dogged builders this year. The NBFC crisis also came at time when the real estate was picking up,” said Mohanani.

MahaRERA has been adopting a carrot-and-stick attitude in which it has penalised builders for violations, but also given them concessions to complete projects and hand over possession to buyers.

In 2018, builders focused more on finishing existing projects and selling them rather than launching new ones. For many builders, it was the time to offload their inventory as the unsold stock had reached record levels.

In Mumbai, the figure touched 1.07 lakh and in the Mumbai Metropolitan Region (MMR), it was 2.71 lakh. Many leading builders for whom small houses were a no-no for years joined the bandwagon, resulting in a spurt in compact, one bedroom-hall-kitchen apartments.

Manju Yagnik, vice-chairperson of Nahar Group, credited the affordable houses as a driving force for sales. “The year 2018 witnessed traction towards affordable housing projects, and the sales of these projects are expected to further gain momentum in 2019.

The government’s PMAY (Pradhan Mantri Awas Yojana) subsidy scheme, which for first-time home buyers, has also been a success,” said Yagnik.

Another welcome news for builders was the passage of the Development Control and Promotion Regulations (DCPR) 2034, which cleared the path for various new and stuck projects.

From the government’s side, the 535-acre Dharavi project was revived while Maharashtra Housing and Area Development Authority (Mhada) cleared the way to issue tenders for its ambitious 128-acre Motilal Nagar revamp project, which is expected to generate at least 18,000 low-cost houses.

According to both builders and analysts, the next year will be gloomy for at least the first six months, thanks to the upcoming parliamentary elections as well as the continuing slowdown. “The market will pick up pace only after six months in 2019,” said Pankaj Kapoor, chief executive officer of the real estate research firm, Liases Foras. “The NBFC crisis is slowly receding and some funding is taking place, but it will need some months to get back to full-fledged infusion of liquidity,” said Kapoor. He said that great strides are likely in the affordable housing segment.

According to Anuj Puri, the coming year will see massive consolidation.

“Most of the small players will either go for joint ventures or sell off their projects to bigger players. It will be good for the real estate sector,” said Puri.

First Published: Dec 28, 2018 00:38 IST

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