Monday, 22 August 2016

7th pay commission effect on real estate market

With the implementation of 7th pay commission, the realty sector in India is going to witness a rise in the home purchases especially by the government employees as it will increase their home loan eligibility.  The 7th Pay Commission recommendation will be effective from next year and the Cabinet will decide if the arrears for the six months have to be paid in one go or in installments. The developers are already planning schemes to attract the government employees to invest in their projects. The government’s decision to implement the recommendations of the 7th Pay Commission will benefit over one crore central government employees and pensioners. Also, the housing loan allowance has been hiked from Rs 7.5 lakh to Rs 25 lakh. Due to this hike, there will be more liquidity in the market as the purchasing power of a large chunk of central government employees will increase.  When the income of a person increases, he tends to spend more on things to fulfill his needs and to upgrade his status. Therefore, this will increase the demand of Houses in the market. In the last 2-3 years, the demand has been declining because of high-interest rates. Currently, the real estate sector is weak because of the low demand and high debt. But demand for residential property may show upwards trend because of the increase in the disposable income.

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