It all began in 2013 and then 3 more years 2014-15-16 that Patna real estate has gone down and down searching not for growth but the BOTTOM. A screener that can be used to measure the “freefall” is that a leading English Daily, Times of India, closed the publication of its monthly property supplement for Patna due to lack of interest of readers and more important revenues. We have named these down and down years the “Kuldeep Narayan Era” of Patna real estate after the erstwhile Municipal commissioner of Patna for major part in these years.
As it seemed that the U turn for Patna real estate has arrived in the last half of 2016, the number of new real estate regulations and Demonetization by the “King of India” bombed Patna property market to take it to new lows. What is in store for Patna Realty Market in 2017 in light of introduction of regulations like RERA, Benami Transaction Prohibition, REITS, GST, lowering interest rates, lackluster interest of State government for Urbanization and industrialization, shift of focus on Affordable housing and of course the Demonetization. In one line, we are going to see PATNA REAL ESTATE decidedly demarcated into categories called GOOD, BAD and UGLY in 2017. The entry barriers will rise and the survival of the “adopter of changes” will be the story of the year.
We prefer to start with the UGLY so that we close the article on good note; Happy ending principle.
The Ugliest part of Patna real estate is Patna Nagar Nigam itself. What we mean can be realized by visiting the website of Patna Nagar Nigam, further verification can be carried by visiting its office and the last straw could be if you ask for any information regarding Patna real estate, not to speak about the experiences of the Patnaites having some or any work at Patna Nagar Nigam. The Patna Municipal Commissioner or the Mayor cannot even tell exactly that how many occupied Apartments exist under its own area. Pity!! The more saddening part is that they are hell bent NOT TO IMPROVE EVEN A BIT. It is rotten to the stage that it should be dismantled at once and a NEW organization put in its place. Patna is without a TOWN PLANNER for decades, yes Patna Nagar Nigam has no Town Planner; JUMBO!! Let us stop here for better and not discuss Master Plan, Smart city and many, many other issues. The cities have moved to Big Data, Predictive Analysis, AI, BOT, IoT, BlockChain but Patna Nagar Nigam has moved to medieval ages. We say medieval because in Ancient India Patna was one of the best cities of the world. (refer, Indica by Megasthenese).
If anyone thinks that the Demonetization has dried liquidity in Patna Real Estate the most, “Rethink !!”. RERA (real estate regulation act) as a regulation; which still has not been notified by the state government of Bihar; is going to dry liquidity by about 60% in the real estate business of Patna. We do not see anybody really prepared in Patna Realty sector to be able to answer that. So we see issues coming up which will be not easy to handle once the state government notifies RERA. The biggest impact it will have will be on launch of new projects; RERA demands financial prudence and Patna property lacks it in abundance. The builders and developers in Patna will have to wake up or EXIT. To add, initially buyers will have their share of pains due to RERA, as if they did not have enough in last three years, it will invite number of new litigation and litigation means TARIK par TARIK… though with RERA unfair trade practices with be negligible and it will bring professionalism in the long run.
The third most populous state and the highest density population wise among states (when not considering UTs and Delhi) of India, Bihar had an impressive growth rate in last decade, more due to low base rate effect though. The urbanization of the state is only 11% and there are no signs that the state government has any intentions to focus on this parameter, we have been sleeping and we will keep doing so. Patna is yet not in the Smart city list!!! Not only URBANIZATION but our state Bihar has failed to attract industries too in the last decade. Even the service sector too seems to be stagnating in the recent years. But natural the employment rates are falling in one the youngest areas of the world. With it will falter the domestic consumption story of Patna and the bad news in Gulf will pound it further. On the other hand, a bit by the government can turn the story around. The fast growing young population of Patna has very little household debt and the finance industry is maturing day by day in Patna that will suit the borrowing needs of Patnaites. Added to this will be the repeated rate cuts by the RBI in 2017 and we have perfect conditions for Home purchases!! Additionally investors all over the world and India are desperately chasing yields and Patna could be that speculative play. INVESTORS in BIHAR, are we kidding, Not at all, 2017 is the right time for Bihar to woo INVESTORS from CHINA and JAPAN. Bihar needs to fully focus on these two countries and the ball will start rolling. They need us as much as we need them. All this will lead Patna’s middle class to come to its own and sure to demand housing to suit their tastes.
An IT park has been announced (only announced) for Patna recently, at last!! Though the IT sector has peaked a bit all around world. We are preparing for the second round of IT boom. The important thing is at least we now recognize that IT is required in Bihar. Similarly if the government realizes that there is boom in business Park development all around India BUT Patna, it will be better. Patna sorely needs Business Parks due to the poor infrastructure in our venerable city and suburban development is creating entirely new business and residential neighbourhoods.
REITs are still to see the light of the day in India and India is struggling to create REIT market for years. Therefore we do not foresee any REIT getting involved in the next two years in Patna real estate. Hopefully in 2017 REIT gets a start in India. Once it takes off on national level Patna can after a year or too can attract Chinese conglomerates to enter through this route too. That is why we are saying to start wooing them from this year only. Because in corporate investment, it appears that China’s most forward-thinking companies would see the similarities with their own nation and Bihar – and want to profit from them.
After a long haul of policy paralysis, Patna real estate is set to transform from a HUS -HUS market( no body shares information) to transparent one. The sector had perception failure till now, but the new regulations with a bit of support from the government will be instrumental in instilling more transparency in the sector and confidence among the home buyers in Patna. 2017 will be the year of implementation and digitization for the realty sector. The realty market of Patna will witness Digitization not only for payments but for whole processes involved, marketing, sales, office automation, vendor management etc. The re-sale market will subside in the background by the end of 2017 and the primary market will start dominating by the year end and more so by next year. These new regulations and decreasing interest rates have considerable potential to change the way Patna real estate sector works. The reforms are set to bring transparency and build a robust ecosystem. There will be a definite advantage to responsible developers in Patna and a game changer for others. Besides these, a couple of announcements seemed to be made in the passing but is extremely crucial to this sector. These were the intent to digitize land records at a greater pace in Bihar, change in arbitration norms for construction industry and setting up of a government committee to look into the strategic sale of government assets that include land and manufacturing units. All these changes too, we perceive to be the game changers for the industry in coming years.
|Growth In Patna|
2016 ended with lower new launches and sales volumes in Patna realty market. But at the same time Patna property market has lesser unsold inventory due to complete ban on passing building maps and other permits in the past. While the stated prices of property still remain elevated in Patna, transaction prices have fallen by 10-15% and even more on case to case basis. It is a tough market. Even though builders may not be giving discounts openly, behind closed doors, negotiations are on. Discounts have increased significantly in the secondary market and distress sales are becoming increasingly common in Patna real estate. One more reason that demand for property in Patna has been stagnating is that during the last decade property prices in Patna have risen strongly, while salaries have not kept pace. Houses have become unaffordable, so sales aren’t picking up. The situation may take two more years to stabilize on this parameter, with the green shoots becoming visible after a year. The interest cuts too will help the cause. Te correction in property rates in Patna was overdue and once they get correctly priced the rental yield too will be close to the cost of borrowing and will increase further investments.
We should not forget that the Patna property market has certain systemic issues because the market is built on speculative ground and the basic financial and execution discipline required by a developer is absent. The only trigger that will get Patna real estate back on its feet is execution and delivery. Consequently, we believe that the Patna real estate sector will emerge stronger, healthier and capable of long periods of sustained growth, provided adequate policy/regulatory support.
Patna ka Apna Property Portal