The real estate industry in India, for the last few months, has gone through a period or correction. The growth of the sector had slowed down to a significant extent, but it is recovering at a fast pace. The slowdown has been evident in the accumulation of inventory in the key cities. However, the moment of truth is not far from now, and the rough patch seems to be over. Along with the external forces, the industry is gradually getting back to its normal health. Over the years, several factors had slowed down the real estate economy, which include the lack of a good governance mechanism and inefficiencies in the sector.
Among the external forces, the RERA (Real Estate Regulatory Authority) has played the most dominant role. The government had implemented the regulatory authority to bring a greater degree of transparency in the industry, redefining the engagement among the stakeholders. This has proven to be a major development. The impact on residential developers has been immense, and they have to adhere to the norms of RERA to operate in the market. The reforms ensure that only the strong and genuine players will exist in the real estate market, while the corrupt ones will cease to operate.
However, certain issues need to be sorted out before the real estate industry grows on a fast track. The RBI is presently monitoring the lending policies in the public banking sector. They are carrying out a good effort to get rid of the NPA mess. Traditionally, the public sector banks have been providing capital to the real estate sector. In fact, a continuous support from these banks is often considered to be an important factor of recovery after the Global Financial crisis in 2009. At this point of time, the regulators are strictly monitoring the banking sector’s exposure and scrutinizing the loans stringently. Besides, it is important to keep an eye on the management of these banks. In the past, the loans were doled out easily, but the projects were unrealistic and lofty. On replacing the cheaper capital of the banks with the expensive capital provided by the NBFSs, the developers are finding a difficult time to deal with the finances. Even though the sales pick up momentum, it will take a few years for the industry to get back to its normal health.
Another factor that can lead to a consolidation in the industry is the expedition of the cases of consumers and customer activism. The authorities have failed to stick to the deadlines over the years and failed to deliver what they had promised. As a result, the investors had become frustrated. With the inception of the RERA, they expect the situation to improve.
