The government's recent move to promote transparency and fight corruption, along with a host of other policy and regulatory initiatives, will have a positive impact on the real estate sector, otherwise notorious for lack of trust and credibility.
In the near-term, land prices are likely to be hit the most by the government's demonetisation drive, as the cash component had, so far, dominated such transactions, especially in the unorganised sector. Transactions in the secondary market may also be impacted negatively. There might also be liquidity concerns, especially for smaller developers, which may result in delays in construction. It is, however, expected to result in increased affordability, particularly for the housing sector, in the long run.
The long-term outlook for the real estate industry looks positive. A dip in capital values and fall in interest rates will be beneficial for property sales, and the overall sector.
While immediate liquidity is a concern, windfall deposits following the demonitisation move may provide the banking sector with greater liquidity to lend, and at lower interest rates. Several other steps taken by the Centre in recent times - from the Real Estate Regulatory Act and the Goods and Services Tax, to Real Estate Investment Trusts - will further improve transparency and increase investor confidence in the sector.
While a changing regulatory landscape has ushered in policies related to smart cities, transit oriented development, Model Tenancy Act, Model Building Bye-laws, the RERA, and GST, among many more, the real estate marketplace too has responded with transformations of its own.
The property market, in fact, has been evolving continuously, shaped by changing business practices, global trends, advancements in technology and the proliferation of big data. The rise of e-commerce, shared workspaces, incubation spaces for start-ups, crowd funding and automated valuation models are just some of the new and innovative ways real estate businesses are run today. As a result of these dual sets of change drivers, the focus has increasingly been on areas such as the value of land and real estate, a diversified talent pool, and technology.
Technology, however, could be the key driver to improve the way real estate works in India. Hyperconnectivity and instant delivery of information will have profound impact on real estate markets, and will lead to more viable choices for global investors. For instance, corporate real estate (CRE) analytics around employment and skill sets may affect the location and position strategy of organisations. Macro drivers of change in the region's CRE arena will likely to remain consistent in 2017 - economic uncertainty, cost stewardship and the increasing importance of technology within the workplace.
Paying heed to what our millennials have to say will be a major way forward for the industry. A recent CBRE survey says millennials are set to shape the future of real estate in the Asia Pacific region and the influence of the millennial dollar on commercial real estate, workplace environment and consumption habits.
This column is written by, Anshuman Magazine, Chairman, India and South East Asia, CBRE
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