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7th Pay Commission – More than Govt Employees, Realtors Pray for early Implementation – Post revision in their salaries, the purchasing power and borrowing capacities of the government workforce are likely to increase, brightening the prospects for the real estate sector.
As the Centre is preparing to implement seventh pay commission recommendations, real estate sector is expecting to get a major boost. The government employees may turn to investing in realty, real estate sector hope.
Post revision in their salaries, the purchasing power and borrowing capacities of the government workforce are likely to increase, brightening the prospects for the real estate sector.
While, on the supply side, the country’s real estate sector is likely to be supported by recent easing of foreign direct investment (FDI) norms by the government, the implementation of the pay panel proposals is being seen as a “potential game changer” on the demand side.
“Even before the seventh pay commission is implemented, we’ve started receiving inquiries for purchasing properties,” said Shekhar Patel, managing director of Ganesh Housing.
The real estate developers in the Ahmedabad city estimate that there will be a minimum surge of Rs.8,000 to Rs.10,000 increase per month in salaries of various central government employees. As a result, the borrowing capacity may increase in the range of Rs 8 lakh to Rs 25 lakh depending upon the rise in salaries of various categories of employees.
“It will be a game changer for the real estate sector, especially when interest rates have come down and prices of the real estate have bottomed out,” said Jaxay Shah, president-elect, Confederation of Real Estate Developers’ Associations of India (CREDAI), National.
A report prepared by Credit Suisse says that the 7th Pay Commission recommendations will have a significant impact on the real estate cycle in small towns as more than 80 per cent of Central government employees reside in tier II, III cities.
“Most of this impact is likely in the smaller cities (only 20 per cent of central government employment is in the tier I cities). The Pay Commission recommendation, in our view, is an important milestone in the real-estate cycle in the smaller towns, recent weakness was likely the effect of the last pay commission fading,” said the Credit Suisse report.
“While the office market has picked up, residential market is expected to take at least 12 more months to pick up. The market is still full of unsold inventory and till the time it gets absorbed, the sector will remain weak,”said Samantak Das, chief economist & national director, Knight Frank India.
“I think the Pay Commission recommendations will be inflationary so the actual benefit that may come to employees may only be around 10 per cent as against a hike of 23.5 per cent. And if the developers decide to increase the price then it would be a dampener,” Das added.
Source : TOI