Real estate developers continue to restrict the launch of latest residential project.

Real estate developers in all over the country including top six cities such as; Chennai, Hyderabad, Mumbai, NCR,, Pune and Bengaluru are continue to restrict the launch of latest residential project because of oversupply and much more inventory from last 8 quarters, as per the statement of Samantak Das, who is the Chief Economist as well as Director research of Knight Frank India, which is property advisory firm. Most of the launches are from the January to March 2015 quarter however; in the same period last year the sales volume was remain same. According to the Index of Real Estate Sentiment for the duration of January to March in 2015, the new launches record the marginal improves in last six months.

The same report suggested that the majority of the real estate developers and financial institutions foresee the prices remain in the coming six months. Real estate stakeholders were bullish for the residential sales before the general election in the year 2014. The real estate sentiments have dropped in last one year and so the sales volume as well. Only about 15 per cent of the respondents are expecting the residential sales will get the better move in upcoming months. It is expected that the increase in prices will reduced to less than half in the third quarter of 214.  In present only 33 per cent respondents believe that the property prices will increase the coming months.

It is expected that soon real estate market will witness the fresh supply as we have seen in 2014 and the same trend will continue in 2015.Whereas; there will be drop in the transaction volumes in the first quarter of 2105 and it was approx. 15 per cent drop in the absorption of office and commercial spaces, in short we can say that it was due to the lack of quality supply of office space supply however; some big ticket transactions are still pending. With the reports its clear that real estate market will see the fresh supply in coming years and the majority of the supply will be by stakeholders who had inventories. They have also expressed their positive look towards the rental appreciation for the duration of next six months.

The real fact is that its looks like that economy is revving up with REITs as it has led 68 per cent of the respondents to believe that the latest supply in the office and commercial supply will witness the uptake in the upcoming months. The real estate sentiments in reference to the office space and rental appreciation are the highest price from last six quarters. With significant it’s clear that 85 per cent of the respondents want the rentals to see them as increase going forward.

The stakeholders from all over the country are continue to be optimistic about the future of real estate market in the country as west and north zones are experiencing the dip in the real estate sentiment levels during the first quarter of 2015 compared to the last quarter, whereas; the east and south zones are expecting the revival in real estate sentiment.

To protect homebuyers from unscrupulous property agents, the ministry of housing is planning to make it compulsory for real estate brokers to get registered with the proposed real estate regulatory authority (RERA). It also plans to expand the purview of RERA to cover commercial as well as residential real estate.

Real estate agents will now have to get registered with the proposed real estate regulatory authority and get a licence and get it renewed periodically before they set up shop. If the broker were to commit a fraud, the licence can be cancelled – as is done in Dubai and Singapore. It also means the end of the fly-by-night property agents.

Honey Katyal, CEO, Investors Clinic says that it is a welcome move as brokers will be made more accountable for property deals by getting a service tax registration code and a licence from the government and paying service tax to the authority. Now they get just a dealer code from the developer. The real estate market is also going to get more organised.

“The fact that a licence can be cancelled if the broker were to indulge in fraudulent activities will instill fear in the minds of the broker community,” he says.

S K Pal, an advocate, says that since brokers play the most important role in the supply chain – they are the first point of contact before the buyer finalises a property deal – they ought to be made accountable.

In most cases, when problems arise with a project, the broker simply washes his hands off the entire deal. That’s primarily because he has received his commission and the matter is closed.

If brokers are regularised and their licences renewed from time to time, they will be brought under the tax net and will also have to pay licence fee to the government which means revenue for the latter, Pal adds.

The move will help regulate black money, increase revenue collection, and strengthen the system of brokerage. Pal cites an example of a doctor who booked a property worth `80 lakh in the NCR. The broker he had invested with had promised him a free ticket to Dubai but the trip never materialised because the broker did not get his commission from the builder. The matter went to court.

“A qualification bracket can also be brought in. The message of the government is clear – strengthen the house buying process by bolstering the confidence of the investor. Regulating them is essential because the broker is always in a better position for collective bargaining with the builder as he does block bookings for them,” says Pal.

In the long run, the role of brokers can be enlarged to that of agents who can sell Real Estate Investment Trust (REITs) in the future; they can also operate seamlessly anywhere in the country. What this means is that the marketing cost of builders can come down drastically.

Will bringing brokers under the ambit of RERA create another pile of files on property disputes? This argument does not hold water as initially files may pile up but in the long run, as the market gets regulated, agents who are found to have indulged in fraudulent practices, will be ejected from the system and cases of fraud will come down drastically.

If you say that one would be able to buy a property with mere 2 Lakhs a couple of years back or say even months back, no one would be able to believe. This money is enough for a stock broker to submerge a person in tips of investment or a bank to probably lay some foundation stones but later on it could take ages for one to actually get their hands on the property.

Real estate investment trusts (REIT):

SEBI has issued some final guidelines for real estate investment trust which will help any investor having 2 Lakhs to get a piece in the real estate market. So, there are no more reasons to become a laughing stock in various Realtor’s offices.

These are similar to mutual funds, the only difference being, the money collected from investors goes into property rather than stock market and various bonds. There has been lot of brain storming being done on this trust but the current union budget seems to have taken a major hurdle out in the form of taxation of the REITs.

Scopes of REITs:

 Past few months have seen a substantial decline in the real estate market and there were lot of concerned raised by the people in this industry, through the new guidelines, SEBI has been able to put all these issues at rest. So this has come as a boon for both investors and the real estate industry as it will increase the cash flow in the drought hit market. As per the Chairman of JLL India, Mr. Anuj Puri, a cash flow of nearly Rs 60000 to Rs 70,000 crores can be expected through conversion of half of the Grade A office to REITs.

Market Entry Barrier:

When it comes to investment in Metropolitan or Tier 1 cities, the minimum investment could be upto- Lakhs and as now due to SEBI’s guidelines it has been considerably brought down to Rs 2 Lakhs, inviting more number of real estate investors in the market. Now, the minimum investment could be expected to be lowered to even Rs 1 Lakhs in some of the secondary markets.  As per the CEO of HDFC bank, Mr. Mistry, this has given a ray of hope even to the middle class income individuals as they can now hope to invest in real estate.

The only problem seems to be that the real estate has no space of can take lot space in form of investment in the portfolios. There are certain income groups who say that this might have come at the right time but it can negatively impact the real estate market in the form of high property price. The main idea is to resolve the financial issues faced by the developers and the banks funding them.