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Seventh Pay Commission: Benefits and Impact on the Real Estate

12 Jul 2016

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Seventh Pay Commission: Benefits and Impact on the Real EstateThe Union Cabinet’s decision to implement the much-anticipated Seventh Pay Commission effective 1st January 2016, has brought much relief and cheer to public sector employees, pensioners as well as the real estate sector.

The pay panel proposed a large salary and pension hike for Central Government employees and pensioners. It also recommended that a 16% hike in basic salary and 138.7% increase in house rent allowance (HRA) could increase the housing demand. Additionally, the housing loan limit has been hiked.


   - Benefits for Government Employees, Real Estate Sector and More

   - The hike in salaries will boost the purchasing power of government employees, providing the much-needed boost to the real estate sector, as the demand for housing will go up.

   - It will enhance the loan eligibility and repaying capacity of the individuals, and motivate them to buy or invest in a home.

   - Moreover, buyers may even look to invest in bigger size homes.

   - This will lead to the growth of the real estate and overall economic development of the nation.

   - The extra cash in buyers' pockets will more likely boost sales of automobile and white goods.

   - The proposal also had a positive impact on the realty stock market. The realty sector’s index on the BSE rose by 45.70 points to end at 1497.06 points from 1451.36 points.


The hope for the real estate sector now depends on the continuing low inflation trajectory, better transmission of rate cut by banks and an overall pick-up in the economic activity. 

Housing sales are expected to gradually rise by the end of the year. There will also be several launches in some locations. The implementation of RERA Bill will also help the sector by bringing in more transparency and enhancing buyers’ confidence.

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