Indian Prime Minister Narendra Modi
Indian Prime Minister Narendra Modi waves to supporters at the Trade Facilitation Centre and Crafts Museum after offering prayers at the famous Kashi Vishwanath temple, in Varanasi on May 27, 2019. Image Credit: AFP

The win for Narendra Modi to a second term as India’s Prime Minister should lend maximum credence to the country’s real estate sector … and in a manner most exceptional. The government’s first term was at times contentious, brought on by financial realignments like the demonetisation drive, the passage of Rera (Real Estate Regulation and Development Act) and GST (the Goods and Service Tax), which hit the cash-dependent sector particularly hard.

Predictably, these sweeping reforms were met with dissent. But now, the luxury end of the property market seems to have taken a turn for the better since the reorientation.

As long as there is a desire to live like royalty or be an in-your-face show-off, luxury real estate has a future. India’s real estate sector expects investments to double to $10 billion in 2019.

The paper trail requirements and financial transparency is making the process more streamlined … and a trustworthy experience for the buyer. But of all the reforms in the first NDA term, Rera seems to have had the most impact so far, not so much on newer developers as on the bigger players with sizeable unsold inventories. More so, given that it is now mandatory for 70 per cent of collected funds to be deposited in bank accounts through cheques, thus restricting unaccounted money being flushed into the real estate trade.

Aside from financial transparency, Rera is conducive to prospective buyers as developers are obliged to quote prices based on the carpet area (inclusive of usable spaces like the kitchen and bathrooms) and not super built-up area. But the Rera mandated processes need to hasten and provide legal and financial relief for aggrieved buyers who need long over due compensations from unscrupulous developers.

The clean-up in the business has only just begun, despite the new regulations and revamp of archaic property laws like the Insolvency & Bankruptcy Code and Benami Transactions (Prohibition) Act. For developer businesses to regain trust, compensating buyers for their losses is vital. And it should become a regular occurrence as compared to the rarity it is today.

Within all the luxury developments getting built, there is a shift in the market of late towards“aspirational luxury” residences. Take for instance a project where units are priced at 70 million rupees and upwards for a three-bedroom in Mumbai’s Bandra Kurla Complex. Sure, these residences allude to a luxurious lifestyle with cleverly scripted and assertive marketing hype. But the insides of these residential towers are at most basic, with a garden path, a swimming pool and some semblance of a gym thrown in. Plus unobstructed views of the city’s construction-laden skyline.

Needless to add, it’s a “white elephant” investment for owners as resale inventory is at its lowest. Despite the unrealistic rental projections from the developer, there are few takers. Such projects stand testimony to the “mimic luxe” gimmick they are based on.

These kind of constructions need to be reined in, as these will lead to over-priced and unsold inventory and affect buyers far more than the builders.

Rubina A. Khan is a Mumbai based writer.