Free Press Journal

India’s merry market – Real or perceived?


Since the Modi government came to power three years ago, the general perception is that the markets are in buoyancy mode. Is the perception of achhe din true, or is it more of a hype, or a bit of both? Vidyottama Sharma tries to find the answers.

Whatever the controversies surrounding the Modi government since the last three years, the market buoyancy, or at least the perception regarding it, cannot be wished away. Sentiments have been running high in the market and the industries have often spoken positive about the government’s initiatives regarding growth and stability. Even a hard dose of demonetisation led to jingoism among the masses – the criticism could only cause a slight dent in the government’s image.

A few significant things that cannot be missed though are: In Modi’s rule, the GDP grew to 7 percent. On July 3, the S&P BSE Sensex stood at 31,209.79. The Sensex in May was often above 30,700. The inflation has dropped by a few points. So, the market has indeed been on a high run.

But, is this adrenalin-injected market actually so buoyant? Is the ground reality truly so rosy? Is affordable housing a realistic concept? Are banks internally happy with the various government initiatives? Or, is there a gap between the perception and reality? Despite the obvious jubilation, there are many who opine that the market does not reflect the growth that is being claimed. So: What is the truth and what is needed to deliver the actual results?

 “Whether the Government’s vision for ‘Housing for All by 2022’ is realistic and implementable to its intended extent is still a big question mark,” says Anuj Puri, Chairman – JLLR (JLL Residential). “Definitely, it seems impossible if enough land is not released for the creation of affordable housing. Various Government agencies such as the Indian Railways do, in fact, hold sizeable land parcels which could logically be deployed for this purpose”.

Puri explains, “Land is a very price-sensitive commodity, and its current shortage in major city-centric areas prevents the development of affordable housing in areas where it is most direly needed. This is not the only area that needs to be looked at seriously. The lower-income groups also need access to housing loans to a much greater extent than the PMAY (Pradhan Mantri Awas Yojana) scheme offers. In the first place, awareness about this scheme among those whom it intends to benefit is seriously lacking. Also, the tedious KYC norms need to be relaxed for low-income, informal sector buyer who has the most pressing need for housing. Above everything else, the obvious need of the hour to unravel the Gordian knot of complexity surrounding affordable housing in India is concentrated political will”.

A sentiment echoed by Anand Mane, Managing Committee Member – Youth, MCHI-CREDAI (Maharashtra Chamber of Housing Industry – Confederation of Real Estate Developers’ Associations of India). He is of the opinion that the recently approved RERA (Real Estate Regulatory Authority) Act will prove good for the buyers as the projects will get completed on time. “But what about the developer?” he asks. “When the government puts a deadline on the completion of the project, why doesn’t it put a timeline on giving permission to the developer? How will the developer complete the project on time if the permission comes a year late? Moreover, when the agents, engineers, architects and external agencies are a part of RERA, why is the government not a part of it?”

Mane informs that since months, the developers haven’t received any positive reply from the government. “The only response we get is: ‘We are working on it’,” he says. “My existence as a developer is based on the permissions for my projects. So, the feeling in the real estate circles is not positive at all. Today, the banks do not lend us loans. The project costs are extremely high and we need external finance but due to some NPAs (Non-Performing Assets), the real estate sector has been blacklisted.”

Whether the nation attracts good tourists or not proves to be the acid test of its market’s health. So does the travel industry find the market cheerful? “This is not hype, given the strong underlying fundamentals,” opines Debasis Nandy, Chief Financial Officer and President – Commercial, Finance and Accounts, Thomas Cook (India) Ltd. “The indicators are significantly positive – and the Government’s control of inflation, lowering of fiscal deficit, etc. are a few examples. The two pronged benefit of economic and political stability is undeniable and this, in turn, results in a strong multiplier impact that augurs well to catalyse growth for the medium and long term”.

He adds, “From a Travel & Tourism perspective, the potential is truly significant and WTTC’s data reiterates this: India’s travel and tourism sector generated Rs 14.1 trillion in 2016 – equivalent to 9.6% of India’s GDP. It is the world’s 7th largest in terms of size. In addition, the sector created 40.3 Mn jobs in 2016, ranking India number 2 globally in terms of total employment generated. The sector accounts for 9.3% of the country’s total jobs”.

What do they expect from the government for boosting the market further? Mane wants the high loan rates dropped. “Loan interest levels are too high and the buyer does not get tax benefits. The terms of PMAY are too stringent. One clause says: ‘the household income should not exceed Rs 12 lakhs’. Except in Tier 2 or Tier 3 cities, a family that earns Rs 12 lakhs annually will anyway not be able to buy a house on its own. Moreover, where is the infrastructure for it all?” he questions. “And now with GST kicking in, the buyer has to pay 12% GST. His buying cost has gone up by 7% because where will we, the developers, offload our costs? So, how does the whole situation benefit either the buyer or the developer?”

Nandy, on the other hand, says, “The Government’s measures, such as its bold step in the GST initiative, while resulting in short term pain, will certainly see long term gain and benefit the economy significantly in the long term”.

Puri too is optimistic that the NDA government can make a strong difference in the market growth: “Going by its existing track record, the current Government is definitely capable of making the required push – and with Government-held land being matter of public record, of deploying the necessary land resources. The demonetization move and rolling out of RERA and GST are ready examples of a degree of political will which has, in many respects, not been evidenced in India before”.

However, despite being appreciative of a soaring market, Nandy has a word of caution: “Data from the UN World Tourism Organisation (UNWTO) shows that India received merely 9 Mn international arrivals in 2016, and while the Government has begun well to catalyse growth with tourism as a key pillar in its manifesto and its commendable execution of e-visa facilities, its intentions must see sustained delivery on ground if we are to see real impact. Key demands of infrastructure development, safety-security andsanitisation still remain a strong challenge for our tourists, despite announcements by the government such as Swachh Bharat. While the government seems to train its sights firmly on Inbound, Domestic Tourism offers high potential, and the government would do well to target this growth driver (WTTC too states that India’s figures are predominantly generated by domestic travel, accounting for 88% of the sector’s contribution to GDP in 2016).”

While praising ‘highly significant’ schemes like UDAN that have made “travel affordable and accessible to burgeoning Middle India”, Nandy says, “In the tax regime, Destination India compares rather unfavourably with its immediate ASEAN neighbours and results in diversion of tourist inflows. GST rates are steep and 28% on hotel tariffs of Rs 7500 and above (per night) results in an unwarranted hike in room rates – an unviable comparison vis-a-vis competitor destinations in the region. Growing by 8.5% in 2016, the Travel & Tourism sector was the fastest growing amongst the

G20 countries. A further 6.7% growth is forecast for 2017. Hence, while we see significant opportunity, it is concrete and sustained steps on-ground that would lead to market expectation and positive economic indicators for India”. So there, mixed reactions and strong expectations of government’s strong will to make a difference. Will it?

“If we take the ‘2022’ in its Housing for All vision as any kind of deadline, the clock is definitely ticking…”

— Anuj Puri





“A level playing field is critical while the ground reality is that GST gives unfair advantage to international online players- who would benefit at the expense of Indian small & large tour operators.”

— Debasis Nandy




“This entire buoyancy in the market and feel-good sentiment is a hyped story. There is nothing like that.”

— Anand Mane