Centre, states and cities, law-makers, financial and urban regulators, have all focussed their attention on cities in India and how to make them self-sufficient. On this rests the success of the real estate sector as well.
2021 was probably a defining year for the real estate sector, from both the consumer and industry perspectives. End users came back to look for completed and livable apartments, peripheral locations lost their stigma and demand shifted to larger dwelling units. For the industry, the rapid sale of completed housing was a relief, speed of construction came into focus and smaller phases of projects, in sync with consumer demand, became the norm. Policy makers responded to the crisis and the consequent housing need with lower home loan interest rates, time bound suspension of stamp duty and registration charges and focussed on micro-level health infrastructure to deal with the pandemic.
But to my mind the biggest achievement of the year was the acknowledgement of what ails the City Management systems and the efforts to give them enough money to manage their immediate needs. The use of incentives such as achieving milestones to be able to borrow to meet their needs was a forward looking move.
A few sterling documents analysed the property industry in the context of city development and urban planning. The first was a definitive analysis by the Niti Aayog in September on how urban planners were in short supply and why it would impact India in a big way. A country touting urban reforms and with a declared intent of creating 100 smart cities, cannot and must not be short on urban planners. The report is especially important in the context of India racing towards 50% urbanisation from the current level of less than 30%. About 65% urbanisation is taking place in census towns, without even basic master plans.
As cities urbanise, the value of land keeps increasing. The second report I refer to here is the CAG report on what went wrong in the planning and execution of the city of Noida. When urban land becomes very valuable, there is often a risk of unscrupulous officials taking advantage of the system and defrauding the city. In Noida the CAG report has pointed out how multiple checks and balances are required to prevent large-scale fraud. Not only has the city lost revenue, but lakhs of end users have been struggling to get houses that they paid for over the past decade or so.
A third report that I believe is very critical is the State Finance Report of the Reserve Bank of India where it analysed the lack of finances at the city level and how money was produced for states to cope with the Covid-19 pandemic. While enough has been raised to manage the immediate crisis, it is important to also make the city self-reliant so that the Centre and the States do not always have to prop up cities. Also, when huge amounts have been borrowed during the pandemic, the system also has to be made capable of raising enough money to pay back to the financial system. Innovation at the city finance level has to be the order of the day, with rigid checks and balances to ensure that fraud does not take place.
The pandemic has shifted focus to lifestyle amenities such as parks, open spaces, livability and access to personal and public space. Peripheries of cities where prices are low and therefore larger housing units available, have come in demand. Shrikant Shitole, President, Credai -MCHI, Kalyan Dombivali Unit and Managing Director, Tycoon group, says “Infrastructural development is the most fundamental element in defining and elevating the potential of localities. Over time, Kalyan, Dombivali & Navi Mumbai have evolved with improved connectivity, and the upcoming mega infrastructure projects further promise to enhance its accessibility, making these areas one of the most preferred locations to reside in.”
Self-sufficient “mid-scale townships with a wider range of project configurations, especially 1 and 2 BHKs are attracting more demand in the market,” he noted. Consumer confidence has also grown because of the Real Estate Regulatory and Development Act 2016, (RERA) finally resolving some of its problems through interpretations of the law at High Court and Supreme Court levels. Today RERA registration has become a safety hallmark for consumers that money collected for the project would be spent on it and not misused elsewhere.
All-in-all, the year has been a watershed in the industry. With the pandemic still persisting, economic management of cities may hold the key to how the future will shape up.
Views expressed above are the author’s own.
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