There is a lot of speculation as to whether the recently announced salary hikes of government employees will impact real estate sales.
There is a fair amount of attention caught up in the real estate fraternity, and we can see some positive coverage on this understandably heartening news.
Financial Express carried a report that says that the 7th pay commission will have a positive impact on the sector. An Economic Times article also highlights that home sales are likely to improve.
However, we encourage our readers to take this news with a pinch of salt.
“Ideally this increase in salaries should help, considering the increasing buying power of employees, but practically I am not sure of how it will affect the real estate market.
The overall increase is really not that substantial. So, it might end up being not a very big effect on real estate purchases. On small ticket products like consumer durables there might be a bigger impact, but I do not see this as a reason of much cheer to high ticket real estate sales” says Mr. Virendra Sancheti, Partner at Sancheti Builders.
Abhishek Bhatewara, Entrepreneur and Angel Investor feels that it makes sense to tap the government employees, however they form a small percentage of overall buyers. The larger segment of buyers is from IT fraternity or other private sectors. A private sector employee earning a salary of 10 to 15 LPA or more might be a potential home buyer for a house of ticket size 80 Lacs and above. However, a government employee, regardless of seniority is already earning a disparate salary. Thus, this increase of 23.5 % would create a very small new market that would not interest many builders.
Firstpost in its article explains the salary disparity angle very well. (How salary disparity explains brain drain from government)
Real estate sector is reeling under pressure, however good projects are still selling. Yes, the sales are a bit slow, but the demand for good construction projects has not reduced. With RERA coming in to force, and the positive sentiments around many construction projects, we feel that the market is gearing up for a growth.
Aditya Parashar, CEO, Superise.com feels that the 7th Pay commission is expected to bring some cheer, even if in small quantities.
We expect that such positive news from the government does help, and that real estate sector will see some good sales traction in coming quarters, and that this traction will be led by projects that are perceived positively by the buyers.