7th Pay Commission may not help developers sell homes this time

Last week, the Union Cabinet had cleared 7th Pay Commission recommendations for 47 lakh central government employees and 52 lakh pensioners. The central government employees and workers will now get between 15% to 23.5% as salary hike.

Interestingly, despite the hike in salary and rise in the purchasing power of people, the demand for real estate will remain flat this time, said a Spark report.

Unlike during sixth pay commission cycle, real estate sector benefited but this time demand in the sector will be muted because of high prices of properties and lesser arrears.

As the 7th CPC recommendations are being implemented within 6-7 months from the due date of January 2016, government employees will get arrears for 6-7 months this time as compared to 19 months during 5th CPC and 32 months during 6th CPC. 

Therefore, "the size of arrears is likely to be one third of the arrears government employees had received in the 5th CPC and one fifth of the arrears in 6th CPC", the report said. 

Thus, people will spend more on the discretionary items like white goods, two wheelers, etc rather than spending huge amount on housing in one go.

Real estate is not the only sector to see muted demand. Luxury items like big cars, high budget tours under tours and travel sector, will also see flat demand post 7th CPC, it said.