7th Pay Commission approved by Cabinet; Real estate sector may get a boost, Bengaluru, Pune among best bets

June 29, 2016: Realty experts feel that the 7th Pay Commission will have a positive impact on the sector and provide opportunity to middle class government employee to own a house with increased disposable income.

Photo: Phoenix Real Estate

Wednesday proved to be an important day for central government employees as the Union Cabinet cleared the implementations of 7th Pay Commission recommendations, which is expected to benefit to over 1 crore government employees and pensioners. Realty experts feel that the 7th Pay Commission will have a positive impact on the sector and provide opportunity to middle class government employees to own a house with the increased disposable income. Hike in salary indicates an increased spending power and better economic growth. The government has approved rise in salaries and pension for public sector employees.

The 7th Pay Commission recommendation will be effective from January 1 and the Cabinet will decide if the arrears for the six months have to be paid in one go or in installments.

The real estate sector is already reeling under pressure and revival looks tedious and a long drawn process. Developers are already offering discounts to get buyers back into the market. 7th Pay Commission’s is seen as a step that would boost the demand and home ownership sentiment.

“In 2015, the 7th Pay Commission’s decision to hike the salary of state as well as central government employees by almost 23.6% was seen to have a positive impact on the demand side of residential real estate, as it would boost sentiment for home ownership among a set of buyers who have traditionally been very conservative in matters pertaining to large financial commitments. The increase in demand would be uniformly seen across India’s more affordable cities. Pricier cities would not see much of an impact on this account, as this segment of potential home buyers will be looking primarily for budget homes, ” Ashwinder Raj Singh, CEO – residential services, JLL India said.

Endorsing Ashwinder’s thought, Ankur Dhawan, chief business officer – PropTiger said the 7th Pay Commission implementation will be a positive move and raise the affordability of the government employees. Dhawan further added that the developers would come up with schemes to bring in public sector employees to invest into realty sector after approval to the 7th pay recommendations.

Real estate is under huge stress with high unsold inventory across the country. However, along with 7th pay commission, the discounts being offered by developers is seen as another big step to attract the homebuyers. “With huge inventory lying unsold across the country and developers finding it difficult to offload the existing stock, the road to recovery looks tedious. Knowing that the developer community is focused on liquidating the existing inventory and that they are offering a plethora of discounts to get buyers back to the market, it is a good time to invest in real estate, ” Narasimha Jayakumar, chief business officer, 99acres.com said.

Dhawan said that cities like Noida, Pune – due to its proximity with Mumbai- and Navi Mumbai may attract the public sector employees to look for a house in the affordable sector after 7th pay Commission approval.

Jayakumar added, “One should look out for investing in cities that are witnessing a buoyant commercial and office space market. To this end, cities like Hyderabad, Bengaluru and Pune are the ones to look out for. Riding high on infrastructure wave with a number of connectivity links such as metro, elevated roads and flyovers in the pipeline, these cities are attracting IT/ITeS firms and start-ups to their shores. This, in turn, is befitting the residential landscape by propelling demand. Further, locations such as Noida, Gurgaon and Faridabad in NCR are also touted as investment hotspots, considering the fast-paced infra development, and expansion in retail and commercial sectors. However, anyone investing now should be prepared for a lock-in period of at least 4-5 years to reap healthy returns.”

Amit Modi, Director ABA Corp and V-P CREDAI western UP, said, “the 7th Pay Commission recommendation is an important milestone in the real-estate cycle as an increase in salaries of government employees is likely to boost the demand for home purchases. 

Housing sector is expected to be the biggest beneficiaries of the rise in income and spending capacity of government employees.”

Modi further added that over the last couple of years there has been government focus on “affordable housing”, and a public desire by the Modi government to provide housing for all, hence the affordable segment (sub Rs 50 lakh) continued to command the largest shares of total residential sales and more than 50 per cent of total sales in all four quarters of the financial year came from the segment. The segment is expected to see further traction.

He has listed Bhiwadi, Jaipur, Ghaziabad, Delhi (L-zone) and Faridabad as good real estate investment picks in North India along with Gurgaon, Noida, Jaipur, Neemrana and Lucknow. Thane and Navi Mumbai that gave investors maximum returns in the past four years will continue to give best returns to its investors.

Courtesy: The Financial Express