How Will Real Estate Fare In 2019? Industry Is Positive
The year gone by has shaped the real estate sector to adapt to the various compliances that would ensure quality construction supplied to the homebuyers. The industry as a whole has seen both turmoil and opportunity that is likely to be the trend in 2019 as well.
Here is what some of the leaders of the sector have to say:
The year 2018 has been exciting for the residential sector and has seen both sales and demand pick up across the top seven Indian cities - Bengaluru, National Capital Region (NCR), Mumbai Metropolitan Region (MMR), Chennai, Kolkata, Pune and Hyderabad. Housing sales witnessed a jump of nearly eight per cent in the first three quarters of 2018 as against the same period in 2017. The sector has also witnessed a slew of emerging micro-markets owing to the infrastructure developments. For instance, Airoli in Navi Mumbai, Madhapur Nacharam in Hyderabad, and Pirangut in Pune among others which were once industrial hubs are witnessing traction with respect to demand for residential homes.
The upcoming infrastructure projects will open up new avenues for developers and homebuyers alike. The residential market is vast with several segments coming under its umbrella such as mid-segment and affordable housing. The government has taken measures to boost its ‘Housing for All’ vision by incentivizing private players with tax subsidies to construct affordable homes. Even the mid-segment has seen demand from first-time homebuyers and migrants coming into the city for work. As for luxury housing, the definition of ‘luxury’ in the residential market has changed over the years, and today it means vastly different things to the HNIs and UHNIs owing to their eclectic style of living.
State of the art amenities and international designs have now become a norm and luxury such as abundant privacy and exclusivity has become the most sought after. An important trend in 2018 has been the consolidation of the market. Fly by night operators or landowners who took up real estate projects have been wiped out will find the going tough, helping the serious players fortify imagery and continue to create meaningful residential offerings.
While demand in some markets may have been subdued, the right product at the right location is surely selling. We will have to wait and watch for the next year to see how the general elections play out and their impact on the overall real estate market.
Om Ahuja, COO- Residential Business, K Raheja Corp
2018 will be recorded as a year marked by consistent volatility – on account of both international and domestic events. Globally, several factors such as rising oil prices, simmering geopolitical tensions
between the US and China, prospects of an escalation in trade war, uncertainty in Middle-east and Europe, have caused recurring stress to the markets. Domestically, the Non-Banking Financial
Institutions’ (NBFC) liquidity crunch impacted stakeholders’ sentiments. High crude oil price coupled with weakening Indian currency put pressure on the Reserve Bank of India (RBI) to raise interest rates.
The real estate industry experienced the protracted impact of structural reforms undertaken over the last 24 months, such as Real Estate (Regulation and Development) Act, 2016 (RERA), Goods and Services Tax (GST), and Demonetization, that collectively changed the way business is conducted in the country. The Indian real estate sector, while remained largely optimistic, had their sets of woes to deal with
during the year with various asset classes reacting differently to the global and domestic stimuli.
Whilst we witnessed a healthy growth in office, industrial and retail sectors, we recorded rising interest in niche-segments such as co-working, co-living and student housing. Considering sustained policy focus on construction of crucial national highways and industrial corridors, we saw continued strength in logistics and warehousing with growing interest from occupiers and overseas investor community alike.
The residential sector remained subdued. Although the supply side has done well given a healthy uptick in the number of launches, consumer demand has been lacking momentum especially in premium and
luxury residential segments. However, we see an uptick in affordable housing sector – both from supply and demand side which leads us to believe that it would be a key driver for residential sector in coming
times. Further, the Knight Frank Affordability Index, a measure of how expensive the housing market is, points at rising affordability in several prominent cities. In cities such as Pune, Kolkata and Ahmedabad, the Index was well within the comfort level of the benchmark, while in cities of NCR, Bengaluru, Chennai
and Hyderabad, it hovered close to the benchmark.
Going forward, we believe that the commercial sector would continue to perform well, although it might face the interim risk of supply shortage. Yet, the sector, along with industrial, retail and frontier
segments like co-living, student housing, etc., should hold ground and continue to develop further. Additionally, the affordable housing should witness positive movement. It is important to remember that Indian economy’s secondary and tertiary sectors have attained a
certain level of momentum, from where they will continue the forward-push. Eventually, this should bode well for the residential sector too. As sustained growth takes place in these sectors, increasing financial security over the next couple of years should lead to a higher participation in residential real estate.
Shishir Baijal, Chairman and Managing Director, Knight Frank India
The Indian real estate industry is one of the most globally recognized sectors and a major contributor to the nation’s GDP. The realty market is constantly evolving with consistent progressive policy reforms, new emerging trends and innovation.
While most of the reforms were taken back in 2017, the results of it have manifested this year in 2018. For instance, the grant of infrastructure status to affordable housing, RERA, and GST have had a cumulative impact in the industry. The infra status along with the increased allocation expenditure for low cost homes have further propelled the government’s vision for ‘Housing for All’ by 2022. RERA was introduced with the aim to bring uniformity in the unorganized market and 18 months later, the results can be seen with the increased transparency and accountability and improved demand. GST created a significant impact on how the nation does business with their ‘One Nation One Tax’ ideology. In fact, in the past two years, India entered the elite 100 nations club for Ease of Doing Business and further jumped to the 77th rank according to the World Bank Survey. All these factors have had a cumulative impact on the industry and set the path for a robust and promising framework.
Both sales and launches have grown and are at their highest level since the demonetization period at approximately 1,24,000 and 92,000 units respectively. This validates the government’s efforts to aggressively push for a culture of transparency for a mature market. In the first half of 2018, Mumbai’s residential market grew at 128% YoY, the Mumbai residential market accounted for a massive 40% of the total units launched in the 8 cities under coverage compared to 25% in the previous period. Maximum launches in the mid-segment and affordable housing sector were recorded in emerging micro markets on the peripheries of the city such as Thane, Navi Mumbai, and Central Suburbs. The Pune residential market also witnessed a strong growth in launches during H1 2018 after many years of subdued launches with a rate of 78 per cent year-on-year (YoY).
The year also saw the onset of the long festive season. Several homebuyers consider this to be an auspicious period to buy a home which is further complemented by the offers provided by developers. These offers ranged from flexible payment plans that allowed homebuyers to pay in installments at lower interest rates as compared to bank EMIs or no down-payment and no GST. Others offers were no floor rise cost, discounts, and freebies. These were well received by the home seekers, particularly the ones buying their first home. Furthermore, the industry even witnessed consolidation with the fly by night operators handing over their business or land owners tying up with the reputed players to construct quality projects for the benefit of the end-user. Along with that, developers even strived to innovate with their projects and homebuyers could choose from several theme based projects. These are typically constructed around a central city theme and the residents can enjoy an international lifestyle right at their doorstep. Another trend is incorporating technology in projects be it wi-fi enabled zones, smart lighting, smart features within the house, developers are constantly endeavoring to enhance the value proposition of their offerings.
With the maximum city receiving an influx of migrants each day, there is a need to create more homes at attractive price points. While the island city is starved of space, there has been significant development up north in areas such as Panvel, Neral, Karjat, etc to cater to the needs of all homebuyers. Owing to the availability of huge land parcels at affordable rates and environing infrastructure, developers are looking to construct integrated townships projects.
Overall, the residential market has seen an upward movement and an enhanced investor sentiment. Homebuyers who were earlier fence sitting are now actively looking for homes in cities as they are more sure about their finances. Developers have also gone above and beyond to give a holistic living experience to their valuable clientele. We are optimistic about the future of the industry and look forward to brighter days ahead.
Shailesh Puranik – Chairman and Managing Director- Puranik Builders Limited
The year gone by has been monumental for the real estate industry which has witnessed immense growth as compared to previous years. The progressive policy reforms by the government have had a positive impact on the industry and infused transparency and accountability. Furthermore the sector even saw increased consolidation and coming together of land owners and reputed players to create quality offerings. These micro influences have resulted in a more mature market and positioned it as a viable investment hub. Apart from these aspects, the residential sector in the real estate market has registered growth in the GDP of more than 7.1% in the first three quarters of 2018.
The sector has witnessed a launch of 33,400 units and 1,581 units being sold by the developers. The prices in the residential properties increased by 3.9 per cent whereas rentals saw a growth of 0.3 per cent between January to March 2018.
The supply of affordable housing increased by 100% in the second quarter that led to the overall growth in the sector. The quarter also witnessed a sales growth of 81 per cent with 60,800 units being sold with increase in launches of around 50,100 units.
One of the highlights of the year seen in the third quarter for the sector was the festive season. To ease off the financial burden off homebuyers, developers provided a plethora of offers such as flexible payment plans, tax cuts, no floor rise costs along with freebies and discounts. This significantly helped first time homebuyers get their dream home at a dream price. With RERA enabling customers to get updates on the project they have invested in along with guaranteed timely delivery, transparency in fund allocation has also resulted in NRIs getting attracted to the Indian real estate market.
Additionally, there has also been growing consciousness for green buildings and developers are striving to construct edifices encompassed with green features that offer great functionality and efficiency. With technology rapidly advancing, developers are seeking innovative ways to incorporate it in their products and create smart homes encompassed with smart features. The government has maintained its stance on providing shelter to each individual by 2022 with their ‘Housing for All’ vision. This dream can be seen coming to fruition with several measures such as the grant of the infrastructure status, increased allocated expenditure, tax subsidies and so on. Even GST has created a uniform tax regime in the nation which has propelled India’s strong rank in the ‘Ease of Doing Business’ Survey by the World Bank.
As for the demand and supply in the sector, Mumbai has performed well and drastically reduced the unsold inventory levels. New projects were launched across the mid segment and low ticket sized homes including townships projects. The maximum launches and sales were clocked in the suburban areas of Mumbai across the central and western nodes, Thane, and Navi Mumbai. As for the performance of the commercial real estate sector, India saw healthy demand for grade A office spaces and the concept of co-working spaces also picked up pace.
Overall, the real estate industry has witnessed positive changes and is expected to see further growth in the coming year.
Outlook for 2019
With 2019, expectations are galore for the residential market. Expectations in terms of rising sales and new launches in multiple segments will provide a boost to the sector. The implementation of various progressive policy reforms along with robust infrastructure development will play a vital role in the coming year making the future of the realty industry looks bullish.
Samyak Jain, Director, Siddha Group
The Indian realty sector has witnessed a slew of landmark government policies in the past year that have helped the industry to be more streamlined. Policy interventions such as the Pradhan Mantri Awas Yojna (PMAY), RERA, and GST have propelled the growth of the industry. Without a doubt, real estate has been one of the largest contributors to the Gross Domestic Product (GDP) of the country and this year witnessed a GDP growth of 7.3 per cent, up from 6.68 per cent in 2017-18. In fact, the real industry is expected to reach $180 billion by 2020 owing to reforms, steady demand for homes and focus on affordable housing according to a joint report that was released by JLL and CREDAI.
The focus on affordable housing has struck the right cord by addressing the housing needs of millions. Along with that, the investment conducive environment catalyzed by RERA and GST has further provided a boost to the sector. Maharashtra RERA also provided a model of governance for the realty sector for other states to adopt. The trust deficit that existed earlier has been alleviated with the consolidation of the market. Fly by night operators who often created one project and land owners who lacked expertise in developing are now coming together with the seasoned realty professionals to offer quality products within stipulated deadlines.
These micro factors resulted in a more mature market and a growing pool of genuine homebuyers. It has also incentivized NRIs particularly from USA, Africa and UAE to view India as an attractive investment hub. This is reflected in the sales and launches in the residential sector, as they picked up across top 7 Indian cities at approximately 1,24,000 and 92,000 units respectively – Mumbai Metropolitan Region (MMR), National Capital Region (NCR), Bengaluru, Kolkata, Chennai, Kolkata, Pune and Hyderabad.
Some notable trends that have boomed this year have been the incorporation of cutting edge technology in construction homes. These smart homes aim to offer a convenient lifestyle to the owners where maximum features can be accessed at the mere click of a button. Additionally, the year also saw the rise in the number of green buildings in cognizance of environmental concerns. While homebuyers have plenty of homes to choose from, developers strived to ensure a smooth buying decision with experiential marketing techniques such as virtual reality. Furthermore, to reach out to the international audience, there was active participation of developers from India going to foreign countries to directly touch base with their audience and assist at each step. To add to making home buying a reality, realty players offered flexible payment plans, tax waivers, homes at a no floor rise cost, reduced down payments and so on. The realty market also boomed due to the various road and rail infrastructure projects in major cities thus opening up new avenues for development.
With the ascending Indian economy and the country playing an essential role in the world, the future of the real estate business looks optimistic.
Ashwin Sheth, Chairman and Managing Director, Ashwin Sheth Group
The real estate sector has shown considerable signs of recovery thanks to various positive measures taken by the government in the form of low-interest rates and marquee reforms such as RERA and GST being rolled out and adopted by most of the states. The housing segment has responded positively to the initiative of ‘Housing for all by 2022’ and developers are also focusing more on affordable housing projects to woo the fence sitting customers.
The luxury housing market also did well in some parts, and office market has significantly picked up. The demand for grade A office space in metros outnumber the existing supply, because of rise in the demand from India Inc. as well as multinationals companies alike.
E-commerce has given a new lease of life to retail, and the combination of offline & online has worked wonderfully well for companies, which integrated technology with products & services. Warehousing did substantially well due to the emergence of e-tailing, thanks to the Amazon, Flipkart and Walmart’s of the world.
Another significant step this year was REITs, and the first listing of Indian REITs has been announced; which has pushed the sale of commercial properties and many real estate players are completing their ongoing inventories to take advantage of REITs. The co-working spaces have given a new dimension to the office spaces. And already around 13.5 million square feet has been absorbed by various players.
There has been a significant inflow of private equity in the Indian real estate, which was close to 2.6 billion in the first half of 2018, primarily driven by platform deals across sectors. Even the NRIs might see additional value at this juncture as various foreign currencies like US Dollar, Dirham, Euro and Pound are stronger vis-a-vis INR, and this may be an added incentive to invest now.
Proptech will play a crucial role in shaping the future of the realty industry, with Smart Homes and AI already making significant inroads in the sector. The Real Estate industry will further witness consolidation, in the new regulatory environment which has already seen green shoots in the realty landscape of the nation. We envision the years ahead to disruptive for Indian real estate while it matches on to become one largest employers in the nation by 2020.
Ashish Puravankara, President, CREDAI Bengaluru
Real estate industry has been going through an eventful phase post the 2016 demonetization. The new reforms, policies and regulations have impacted the real estate industry and there is both positive and negative impact on the sector; but these changes are in a way good for the industry as, it is bringing in lot of transparency to the system and also the buyers and investors confidence is coming back in the industry. There is a short-term pain, but it would be a win-win situation for everyone in the long term.
The demand for residential projects has seen a healthy growth in the first half of 2018 and the key markets saw the absorption taking place at a fast pace. Factors like lower interest rates, budget friendly housing schemes and affordable houses coupled with price rationalization by the developers were some of the key constituents to fuel the growth of residential sector. The housing demand was mostly driven by the end users and rightly so, as they took advantage of the favorable market conditions, as well as transparent regulations due to the advent for RERA. Customer are still willing to pay premium for good brands and locations, which has good social infrastructure, proximity to work place, better security, minimal traffic and less pollution.
The commercial or office market has really taken up in the last couple of years and the credit also goes to the stable government and marquee reforms like 100 pc FDI in real estate, grant of infrastructure status and finally the Real Estate Investment Trusts (REITs), getting government approval in India. The concept of Co-working spaces has given a fillip to the office markets and has changed the whole dynamics of office, converting them into flexi-spaces with just plug and play concept. The start-up boom has disrupted most of the traditional businesses and going ahead; technology and Artificial Intelligence (AI) would be playing a major role, as India is inching towards smart cities and adopting newer technologies.
Hospitality is emerging as one of the most profitable sectors among real estate developers with a lot of interest being shown in for leisure as well as business hotels. As India’s domestic demand is likely to surge past any other demand in the near future.
Errol Fernandes, CMD, Ferns Estates and Developers
The last year has been a tumultuous one for India’s real estate market. The extreme ups and downs have left the sector looking almost completely different from what it used to look like, just the year before. While the sector experience the full impact of demonetisation and GST, the availability of cheaper finance schemes kept the market going. The increasing availability of affordable housing in India, enabling homebuyers to make purchase decisions for homes that meet their financial budget as well as easier financing options has enabled many more people to become part of the organised real estate market in the country.
Several major policy amendments changed the status of the Indian real estate market. These were aimed at removing black money and improving the transparency of large financial transactions. These amendments along with better regulations on quality of construction etc have made the residential property sector much more attractive to investors and consumers. This along with the establishment of the Real Estate Regulatory Authority (RERA) which brought in significant protection for home buyers has gone a long way in bringing back confidence in the sector.
In 2018 however, affordable housing was the real game changer. The government’s flagship ‘Housing for All by 2022’ vision which brought in a number policy shifts that have redefined a large part of the sector. As part of this initiative the government announced an additional allocation of 39 per cent in this financial year under the Pradhan Mantri Awas Yojana (PMAY), along with an extension in the CLSS (Credit Linked Subsidy Scheme) to loans up to Rs. 12 lakh till March 31, 2019. To augment the benefits of affordable housing, the Union Budget announced a new CLSS for the mid-income group with a provision of Rs. 1,000 crores. Mission requires 1.2 crore urban homes and another 1 crore in rural India to be built.
The coming year looks bright with over 1.8 million houses were under-construction as of March 2018, compared to 700,000 in April 2017. Because of increasing urbanization and the government’s active support, affordable housing, which was previously a neglected segment, is gaining considerable mileage in recent times. The financial support from the government and the thrust in policies are driving more and more developers to make inroads into the fairly untapped segment.
R K Arora, Chairman, Supertech Limited