Will the residential real estate prices rise post RERA?

By:Vandita Jadeja 2017-06-14

The implementation of RERA has been making news across the Country. With a range of expectations and speculations going around in the market, it is difficult to determine the impact of the same on every segment of the real estate industry. The real estate industry is already going through a low phase post demonetization and the inventory has been constantly increasing. RERA is being implemented to bring transparency in the system and to bring a uniform code of conduct for developers across the nation. It aims to reduce the volatility seen in the sector and to eliminate the trust deficit between the stakeholders. However, it is expected that the residential real estate prices will rise post the implementation of RERA. 

RERA is expected to play a crucial role in the determination of the economic framework of the demand and the supply across the industry. The supply will decline because the developers will launch only those projects which are likely to complete within the proposed time frame. Further, the demand will be robust, but will see a redistribution. The risks of the residential investments will be distributed and so will the reward. We will witness an increase in prices accompanied by the increase in sales. With greater transparency, there will be more end users in the market because of the increased confidence of the consumers in the developers. It is expected that a majority of the end users will hail from the middle income group who will look closely at the affordable housing segment. With the various incentives taken by the Government for affordable housing,the user driven demand is expected to pick up. With a pull back of supply and an increase in demand, the residential market will see an uptrend in the residential prices.

It is also expected that the holding costs for developers will increase. Since no new projects are being launched currently, the window of price escalation between the pre launch and the official launch is now shut for the developers. The additional holding cost will be passed on to the buyers and will eventually add to the cost of purchase. The overall cost of purchase of the land will also go up post demonetization. This will add to the overall input costs and increase the end product prices.

It is important to note that the home loan rates by banks will see a reduction and this trend is expected to continue in the coming quarters as well. An upward increase in pricing is anticipated in a market backed by genuine buyers. The upcoming GST regime is also expected to have an impact on the real estate sector. It will be interesting to note how the sector responds to the various regulations by the Government. Post demonetization, the real estate sector has seen a decline in demand, but with increased transparency and an increase in the confidence by the consumers, the real estate sector could see an increase in demand in the coming quarters.

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