BUY sell RENT Patna

residential/commercial


 THE CURRENT REAL ESTATE RIDDLE WILL DEVASTATE BUILDERS IN PATNA   (16/03/2014)



Even as everyone in our country is now engrossed in the upcoming elections and the government formation thereafter; We in Bihar have lost total focus on the fiscal deficits of state government and the underlying revenue drivers of income from real estate-related activities in the state. It is hard to believe that no residential building approval have been given in last eighteen months in Patna. Is the state government determined to take Patna real estate to abyss? Wake up government agencies, you were formed to assist and felicitate work and not HAULT them.


The decade-long housing price boom has come to an end in Patna due to a multitude of factors. These include the reversal of the expansionary monetary policy by the Reserve Bank of India (RBI), the sub-five percent GDP growth rate of our country, the deteriorating affordability quotient and low consumer confidence due to high and persistent inflation, not to speak of the impending central elections and add to it the great showdown going between judiciary and Patna Municipal corporation from many months. These conditions are converging at the same time and setting the stage for a deep trouble in real estate sector Patna.


The contribution of real estate revenue to total revenue of the state has increased in Biharover the last decade. This is a direct function of increasing property prices in Patna and the number of transactions during the period.


Bihar used this revenue to increase social expenditure or reduce deficits. However, the tide is turning and property prices in Patna are either sliding or struggling to hold. Additionally due to the embargo set up by the judiciary there is no fresh residential project in Patna since last one and half years. The state will face revenue constraints and struggle to meet the budgetary commitments.


There are five main channels through which the real estate market in Patna and whole Bihar affects state and local tax revenues: property taxes payable by owners annually, transfer tax from stamp duty and registration paid on inheritance, sale or lease, sales tax from construction materials used in new buildings or maintenance, sales tax from the purchase of equipment and goods by occupiers and income tax from people and companies active in the real estate Patna. The first two channels, the property tax and the transfer tax, are a direct function of the value of real estate in Patna and the volume of transactions, thereby making a strong case for budgetary constraint for state finances, going ahead.


There is an indirect effect on sales tax revenues related to general household expenditures. A drop in property prices in Patna can reduce sales tax revenues from a range of goods and services. Housing wealth is the most important component for many households in Patna. Booms and busts in the housing market in Patna can induce increases and decreases in personal consumption in two ways.


Firstly, as per the conventional wealth effect, increases in house values raise the confidence of households, resulting in increased consumption. Secondly, households can borrow against the collateral and lenders are more winning to lend in a rising price environment. A downturn in the housing market in Patna will reduce consumption through these two channels, resulting in reduced sales tax revenues of state.


As making dividends compulsory is the only way to bring corporate governance and attracting long term investments in equity markets. Similarly, Bihar needs serious introspection on its approach towards affordability in housing in Patna. The measures taken by the Chinese and Singapore governments to restrict price expansion in the housing sector should serve as a guiding indicator for us in Patna. The time has come to deflate the housing bubble in order to save financial institutions and individuals and channelize public resources for better productive purposes.

 


 

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