Low Interest Rates, RERA Aiding Housing Upcycle, Says Prestige Group
"People are committing to a home as an asset," says Prestige Group MD Irfan Razack.
Low interest rates and stricter regulations are nudging buyers to invest in real estate during the pandemic, according to Irfan Razack of Prestige Group.
Interest rates are at their lowest cycle and customers have confidence now that if something goes wrong, there’s a regulator that will take care of them, Razack, chairman and managing director at Prestige Group, said. "Several people are upgrading from a smaller home to a big one and we are seeing first-timers committing to a purchase."
India rolled out the stricter Real Estate Regulation Act in 2017 that protects homebuyers against mis-selling and delays.
Sales declined during the local lockdowns to contain the second Covid-19 wave but the sentiment is aiding the upcycle, Razack told BloombergQuint’s Niraj Shah in an interview.
The pandemic has spurred consolidation in the sector, he said. "We have seen a lot of movement towards players that have delivered in the past. The ones that were consistent are reaping the benefits now.”
Developers with a good track record will witness “good growth” in the next one to two years as the demand rises, he said.
Costs, however, are up. "All input prices have gone up. Steel, cement, wires, transformers, PVC windows, glass—everything has increased,” Razack said. “It has pushed up costs and have to constantly monitor budgets.”
The commodity inflation will eventually push home prices higher, he said. "What we have already sold, we can’t change that. To average out margins, we have to increase costs in the future sales,” he said. “But it’s a balancing act. We can’t increase it too much, and then maintain acceptability."
‘GST Relief, Moratoriums Needed’
Earlier, developers were allowed to set off taxes paid on inputs from the goods and service tax liability, according to Razack. But since now input tax credit is available now, the costs have gone up by 18%, he said.
Acknowledging that the government has been reduced GST to 5% from 12% on residential properties and 1% from 8% in the affordable housing segment, Razack what they need is concession on input costs. "Building luxury, premium and affordable homes, all cost the same.”
While real estate is a state subject, the Reserve Bank and the Finance Ministry can help developers "breathe a bit easy" and provide moratorium for two to six months, making debt repayment easier. "This will help in cash flow management."
Watch the full interview here: