Like most other business sectors, the Indian real estate market is holding its breath for the outcome of the upcoming general elections. The perception currently driving market sentiments is that market momentum can either accelerate, remain unchanged or decelerate depending on which party is voted into power. Speaking purely from the viewpoint of market sentiment, there is some validity to this perception. However, the fact is that the true benefits of political stability and proactive reforms — if these indeed ensue — will not be felt until much later.
Even if the next government proves to be real estate-friendly, it has its work cut out for it. There are vital real estate regulations and initiatives that have been gathering dust on bureaucratic tables. Though these are crucial for the real estate sector’s growth, there are various complexities that need to be sorted out first. One of the challenges is to be impartial and attend to the interests of all industry stakeholders. The other challenge is to account for all loopholes that could remain to be exploited if not identified prior.
This is especially true of the pending Real Estate Regulatory Bill, which has been hotly contested at every stage. There is no doubt that it must be enacted sooner than later so that the real estate market becomes attractive for foreign investors. However, it appears that no version of this bill that evolves from the various objections and arguments from the industry’s stakeholders will be universally acceptable to all concerned. If so, it will require a strong and determined government to push it through. This also applies to the regulations pertaining to FDI in multi-brand retail — a subject that has drawn an incredible amount of political flak — which would have a major impact on India’s attractiveness as a destination for foreign brands.
Developers have been campaigning for a faster project approval process, and this is justified but by no means easy to do. While faster approvals would beef up the supply pipeline and help bring prices down, the government must also ensure that construction quality norms are not compromised in the process. Also, faster approvals could result in the provision of support infrastructure falling several more laps behind while newer precincts are being developed.
That said, swifter and more determined decision-making than what we have seen so far is definitely of the essence. Many overseas investment funds have so far abstained from the Indian real estate market because of lack of regulation, political instability and bureaucratic quagmire. The new government will have the opportunity of making Indian real estate more investment-friendly and attractive, and this would go a long way in meeting its considerable capital requirements. Investor-friendly, streamlined policies from the new government can be a game-changer for Indian real estate.
— The author is Chairman & Country Head, JLL India
