Indian real estate sector needs more than fiscal stimulus to boom

[ecis2016.org] Where does the Indian real estate sector stand, vis-à-vis other emerging economies and what more can be done, to achieve sustainable growth in the long-term? We examine…

When it comes to boosting the growth of the real estate sector, till now, what every government has done, is to rejig the tax rate, regulations, etc. However, this may not be sufficient for the growth of the realty sector, in the long-term. Besides taxation and polices, a sustained effort to boost innovation in several other key areas, could help to achieve consistent growth in the real estate sector.

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R&D and its role in real estate

China is one of the world’s largest spenders on research and development (R&D) across industries. With research on construction technology, specialty chemicals, new materials, IoT, 3D printing, blockchain and AI, there is also focus on the application of such technologies on diverse areas, from construction to property management.

“The Indian real estate sector has gradually adopted technology but we need more R&D, to address our problems in the areas of civic infrastructure, affordable housing, renewable energy, urban mobility, sustainable development and disaster management. This appears unlikely, without government intervention and regulation, just like the auto sector has been forced to meet the requirements of stringent safety and fuel emission norms,” suggests Aashish Agarwal, senior director, valuation and advisory, at Colliers International India.

Changes in technology and infrastructure

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The requirement for physical infrastructure, is often constrained by limited fiscal resources. In such a scenario, valuation tools can help the developer of any project, to gauge the feasibility of the project in the area and the project’s absorption/sales, thereby, enabling him to come up with a better cost model for the product, says Pankaj Kapoor, founder and managing director, Liases Foras. “Such a practice, in turn, would reduce unsold inventory and boost sales. Other measures, such as e-signatures, as well as online transactions, can turn property deals hassle-free,” adds Kapoor.

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Overhaul of the legal system governing real estate transactions

Cleaning revenue records and land titles, have become essential to ensure that no disputes arise, after the transactions are complete. “While in urban centres, the government has managed to mitigate the problem to a large extent, the problem continues to plague the real estate sector, along the outskirts of tier-2 cities. Land grabbing is another problem, which is taken very lightly by the authorities,” Kapoor points out. To resolve such issues, experts have called for online systems to be developed, wherein, the interested land buyers can directly forward the application to the government offices and get the land title verified, in exchange for a certain fee.

There is also a pressing need for better and faster resolution of stressed assets, through a process that meets prudent governance standards and also provides the flexibility, to structure workable solutions. There is a need to ensure uniformity in the implementation of the Real Estate (Regulation and Development) Act (RERA) across the country and a mechanism to allow single-window clearances for projects.

Real estate: From a ‘product’ to a ‘service’

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With the growing demand for concepts like co-working spaces and co-living spaces, the sector will have to evolve from delivering physical spaces by managing traditional value chain components, to providing integrated solutions and experiences.

Lately, the real estate market in India has seen a paradigm shift, from being a developer-focused market to a consumer-focused one, due to proactive policy interventions. Developers too need to align themselves with this change. Conducting feasibility and product viability studies, with the help of expert agencies before embarking upon any venture, can help the developers to fine-tune the demand-supply dynamics in their favour.

The real estate sector can also learn from the banking and telecom sectors, vis-à-vis focusing on efficiency, building brand and scale, customer-centricity and creating digital assets by leveraging data.

“With greater adoption of prop-tech and by integrating data of users, real estate spaces will be able to provide sustainable physical infrastructure and better services to their occupants,” concludes Agarwal.

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