Home in on that house

If you thought the 2% cut in stamp duty was a good thing, wait a while. The CM is working on a big bang project for the real estate sector

Weeks after the RBI intervened directing top banks to reduce interest rates on home loans, the State government is considering revising the guideline value of land. Besides this, it is also considering cutting the registration fee across all price bandwidths to bring in buoyancy in the real estate sector, particularly the residential sector.

Two days back, the Karnataka government, as promised in the budget 2020-21 reduced the registration fee for properties below Rs 35 lakh to 3 per cent from 5 per cent.

The State government’s move to reduce both registration fee and the guideline value is likely to make home buying cheaper in the days to come and boost the real estate sector.

Chief Minister BS Yediyurappa is said to have directed Revenue Minister R Ashoka to look into reviving the real estate sector which has seen a whopping 52 per cent decline in the first quarter this year when compared to the same period in 2019.

“The CM has asked me to do whatever it takes to boost the sector. We are looking into it and we will take a decision in about a week or ten days,’’ Ashoka told Bangalore Mirror.

This is said to be the first time in decades that the Stamps and Registration department is considering lowering the guideline value, which is the scheduled price of land or property fixed by the government. Normally, the market rates are at least 50 per cent more than the guideline value in prime localities while it could be around 30 per cent more in other places. A reduction in guideline value means a reduction in both the stamp duty as well as registration fee.

Covid-19 impact:

Real estate which was on a recovery path was hit by the covid-19 pandemic. Bengaluru witnessed one of the highest launches in the affordable and mid segment range residential projects before the pandemic.

Muted business environment aggravated by the ongoing global pandemic, weighed in heavily on consumer sentiments, said a report of JLL, a real estate consultant company.

In Bengaluru, sales of residential units came down substantially, unsold inventory increased by nine per cent since last quarter in 2019 and stood at 89,122, an increase in 7,399 units.

The prices too have come down by at least two per cent over weaker consumer sentiments prevailing in the market as compared to the same period in the previous year, the report said.

Developers in top seven cities (Bengaluru, Mumbai, Delhi NCR, Pune, Kolkata, Chennai and Hyderabad) are said be sitting on an estimated Rs 3.7 trillion inventory at the end of March 2020. An assessment of Years to Sell reveals that the expected time to liquidate this stock has increased marginally from 3.2 years in the last quarter of 2019 to 3.3 years in first quarter this year.

Indian residential market began witnessing the impact of the Covid-19 outbreak in March 2020. In the first half of March, walk-ins reduced by 50 per cent and buying discussions at advanced stages were being deferred.

Launches and sales have come to a standstill during the lockdown though there is some interest in ready-to-move residential units.

Industry View

With the interest on home loans at a 14 year low, Kishore Jain, President of the Confederation of Real Estate Developers’ Associations of India (CREDAI) Bengaluru expressed confidence that there could be a slow recovery. He hoped that the State government would come to the rescue of the real estate sector by reducing the registration fee as well as rationalising the guideline value.

Juggy Marwa, Executive Managing Director JLL says that the uncertainty will continue as the buyer will remain sceptical.

This is a buyers’ market as banks are lending and prices are realistic. Despite that the buyers are sceptical if developers will be able to deliver or not. “They are also worried if there will be a second wave of the Covid-19 pandemic,’’ Jain said.

The recovery of the sector, not withstanding the structural reforms of the government, depends on the intensity and the spread of the pandemic.

Ready-to-move-in homes

Despite a complete shut down of the real estate sector during the lockdown and the labour issues faced by it, industry leaders see a surge in demand for ready-to-move-in residential units.

“Nearly 80 per cent of the enquiries were for ready-to-move-in units,’’ JLL Managing Director (Bangalore) Rahul Arora said.

Though there is a large pending inventory, only a few thousand ready to move in units are available in Bengaluru.

Jain says that there are roughly around 4,000 ready-to-move-in units with Credai members, who control nearly 80 per cent of the real estate sector in Bengaluru.

Arora says that budget homes

are not finding traction as people are looking for upgrading their homes.

With work-from-home being a new normal, Anuj Puri, founder of Anarock says that inquires for bigger homes were much more as people in cities wanted to go to bigger apartment complexes and even villas in gated communities which are seen as safer places to live in during a pandemic.