Q1 FY20 home sales seen rising on repo rate cut, new GST rates

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The Indian real estate sector is likely to witness a much-needed uptick in demand and sales
during the first quarter of the financial year 2019-20, according to experts and developers, on the
back of recent changes in the Goods and Services Tax (GST) rate for the sector and the latest
reduction in repo rate.

This hope comes despite the initial apprehensions regarding pick up in sales during the coming
Lok Sabha elections due to uncertainty of policy continuation. But a slew of policy decisions in
the past couple of months, just ahead of the elections, have given clarity and relief for both the
developers and home buyers.

"The Reserve Bank of India (RBI) on its part has been proactive on slashing lending rates.
However, the onus is now on banks to ensure that there is a stronger transmission of these rate
cuts. Once this happens, it is likely to encourage fence-sitting consumers to undertake buying
decisions, thereby providing a fillip to the residential sector," said Anshuman Magazine,
Chairman and CEO, India, South East Asia, Middle East and Africa, CBRE.

The RBI in its latest monetary policy meeting on Thursday reduced repo rate, the rate at which it
lends the banks, by 25 basis points (bps) to 6 per cent. The apex bank also asked the banks to pass
on the rate cut to the consumers.

Niranjan Hiranandani, President, National Real Estate Development Council (NAREDCO), said:
"The Indian economy needs liquidity as fuel to power the growth engine. The RBI move is
expected to lift industry sentiments, as also provide relief to various stakeholders like corporates
as also in real estate, home buyers. 

"We expect that banks further pass down the benefit for the rate cut to the home buyers which
shall further trigger the home buying in to the actual sales."

Another major factor behind the positive outlook for the real estate is the new GST rates in place
from April 1, 2019.

The GST Council in February lowered the tax on under-construction properties to 5 per cent from
18 per cent, and affordable housing projects to 1 per cent from 8 per cent. The new rates,
however, come without the benefit of input tax credit (ITC).

In March, the Council approved transition rules on new tax rates for residential property and
offered an option to the developers for buildings which were under-construction as March 31,
2019, to shift to the new rates without input tax credit (ITC) or continue with the old rates with it.
This gave more flexibility to the builders as many developers had purchased inputs like raw
material and the sudden going out of ITC would have made those projects unviable.
The expectations of higher sales in the current quarter is supported by robust sales during the last
quarter, Q4 FY2019. 

A recent report by Anarock said that deviating from a usual trend of tepid realty sales ahead of
general elections, home sales in the first quarter (Q1) of 2019 (the fourth quarter of FY2019) rose
by 12 per cent across seven metro cities in the country compared to the previous quarter.
Around 78,520 units were sold during the January-March period, said the report. Overall supplies
also increased during the period across the cities.

"The top cities recorded new launches of around 70,490 units in Q1, 2019 (as opposed to 55,600
units in Q4, 2018), a quarterly increase of 27 per cent," it said, adding that the rise in sale and
launches "defies conventional election period trends".

Anuj Puri, Chairman of Anarock property consultants, said that although there were anticipation
of a negative spill-over impact of the NBFC crisis in the first quarter of 2019, housing sales and
new supply assumed an upward trajectory

"The sector is currently riding on a new wave of optimism following the triple benefits it received
from the government in the first three months of 2019. These sops have not only increased
homebuyers' sentiments but will also boost the confidence of builders and long-term investors,"
he added. (AGENCIES)