Infra Talk: Ushering in transparency will boost real growth

Demonetisation is undoubtedly a landmark event in the history of our economy. In my view this move will be effective with initiatives taken by the government in weeding out corruption. Layers upon layers of regulations breed inefficiency and give way to corrupt practices. Demonetisation accompanied by deregulation will produce great results. 

Since 2010 developers have sold properties at low prices and then were hit by severe inflation, resulting in a large number of projects being uncompleted. Most projects sold in that period resulted in heavy losses for developers. Demonetisation is expected to reduce inflation and interest rates considerably which would make projects viable. Developers will be able to have a handle on costs through the life of the projects. 

A major impediment to real estate development in India remains the approval process and India’s low rank in the Ease of Doing Business globally (183 out of 187 countries). It would be welcome if the government can look into this as well. 

The benefits of low inflation, low interest rates and transparency will give a big boost to real estate development in the country, only if it is coupled with deregulation. We anticipate the monetary policy to be forward looking considering the overall economic situation and challenges faced by the industry. Since the last policy, the downside risks to growth has increased and credit off take has remained sluggish. A rate cut now will provide the much needed impetus to stimulate growth in the economy. While the central bank squeezed out some of the surplus cash from the system through an incremental CRR hike, a dip in growth and surge in deposits owing to demonetization will make a compelling point for RBI to reduce rates. This will also reduce the overall burden on home buyers and encourage fresh equity investments in to the real estate sector. The combination of lower interest rates alongside the various progressive measures taken by the government towards deregulation has the potential to reinvigorate demand in all segments of the economy. 

Players who conduct their business with transparency will thrive.