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GST, Rera bump up realtors' woes

Home sales in the top ten regions, including Mumbai, NCR and Kolkata, have declined at a compound annual rate of 8% since 2011

Raghavendra Kamath  |  Mumbai 

real estate

Nearly four months after implementation of goods and services (GST), developers still find themselves in a home-sales bind, unable to imbibe a that, according to them, increases their cost structure.

"The has come as a big burden for the industry. Now only completed properties or nearly completed properties are selling. Those under construction are not seeing many takers," said Vijay Wadhwa, chairman of Wadhwa group, one of the biggest developers in

Under-construction properties attract a of 12 per cent, but completed properties attract no levy.

"Both developers and buyers are waiting for the rates to come down. We are working day and night to complete projects, get occupation certificate and sell them," Wadhwa said.

He said most developers have been bleeding over the last four years, with the bleeding them some more.

Although rating firm on Monday said the value of home sales has risen from Rs 2,709 crore in Q3 FY17 to Rs 3,703 crore in Q1 FY18, the improvement has not been broad-based, with many developers seeing a decline in FY18 sales volumes. 

Shubham Jain, vice-president and sector head, ICRA, said, "The implementation of (Regulation and Development) Act or and over the first half of FY18 has created short-term disruption in sales volumes of many developers. Moreover, the industry faces subdued macroeconomic environment and consumer sentiment.

Recently, another rating and research firm CRISIL said any revival in residential sales is 12-18 months away.

Home sales in the top 10 regions — Ahmedabad, Bengaluru, Chandigarh, Chennai, Hyderabad, Kochi, Kolkata, Metropolitan Region, National Capital Region and Pune — have declined at a compound annual rate of eight per cent since 2011. "The trend appears set to last well into FY19 or beyond, portending more pain for developers," it said. 

Housing sales fell 35 per cent across eight major cities in the July-September quarter this year as demand slowdown continued in the market, according to research firm  

New home launches dipped 83 per cent during July- September period to 4,313 units from 24,900 units in the previous quarter as developers focused on compliance with and implementation of GST, it said. 

Big brands sell

ICRA's Jain sees a ray of hope in volumes reported by a few developers indicative of the scope for organised players to consolidate their market share under the new regulatory regimes of and  

Jain seems bang on. Mumbai-based posted a 17 per cent jump in revenues at Rs 308.5 crore for Q2 FY18 as against Rs 264.4 crore for Q2FY17 and 25 per cent jump in profit after in Q2 FY18.

"With the onset of and GST, we are already witnessing an increase in customer confidence and an improved market sentiment. We believe that credible players are likely to gain ground and unorganised players will be pushed out and we will witness consolidation in the sector," said Vikas Oberoi, chairman and managing director of Oberoi Realty, after Q2 results.

Amit Bhagat, chief executive at ASK Investment Advisors, agrees buyers will shift from unknown developers to known ones due to completion risk, insolvency law and

"When this happens, top 30 developers in the country will post good numbers. All others, that don't have reputation, will see far more headwinds due to over-leverage and over-commitments," Bhagat said.

First Published: Wed, October 25 2017. 02:09 IST