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What is the connection between Real Estate and Elections

31th Mar 2014., While all eyes are on the general elections, the real estate sector is holding its breath for the potential optimism that is expected once the results are out. This optimism is expected to boost transactions and lift homebuyer sentiment.


There is no doubt that the actions and inactions ascribable to the current government have made homebuyers and developers anxious. The next government's economic and employment policies will be key drivers to growth in the real estate sector for the next five years. 2012 and 2013 were not the best years for the Indian realty market, and the slowdown impacted all asset classes, except in a few pockets. Revival is no doubt the need of the hour.


There is a sense of hope among developers for a positive post-poll scenario. Will things start looking up for the sector after the general elections? Will clarity on the new government lead to businesses investing? So far, none of the campaigns have outlined a comprehensive proposal for recovery of the real estate market - specifically in terms of providing more housing and managing interest rates.


Cash Crunch Ahead Of Elections

In India, the property market is a key election financier, and considerable amounts of unaccounted money are being pumped out from the real estate sector to fund the elections. Before the polls, developers are expected to provide liquidity to politicians so as to finance their campaigns. Many developers who are funding possible candidates are delaying their projects due to the lack of liquidity.


The timing is certainly bad. Reduced housing absorption has already adversely impacted developers' liquidity and in turn, developers' funding ability. Political commentators also note that certain properties are sold below market rates in order to generate cash for the election campaigns. Given this situation, many developers cut down on new launches and focus solely on selling the existing inventory.


Realty After Elections

With just a few weeks to go before the world's largest democracy chooses its new government, fence-sitting investors and homebuyers will remain spectators for that period and make their moves. Many assume that property prices will shoot up post elections, but this expectation in unfounded - there are too many factors at play, regardless of which party wins. Election results do not make or break a market, but they do affect market sentiments to a significant degree.