Real Estate Round-up 2019: How India’s Real Estate Sector has Performed in Year 2019?

Jan 20,2020 / By Prahalad Singh / No Comment

Indian Real Estate 2019 Round Off

Real Estate is one of the key driving factors behind the growth of the Indian Economy and plays a pivotal role in the nation’s GDP growth. It is among the most recognized sectors globally. It creates millions of direct and indirect employment opportunities and supports the country’s development. It consists of 4 sub-sectors – Housing, Commercial, Retail, and Hospitality. The growth of this sector is well complemented by the growth of the corporate sector and the demand for office space as well as urban and semi-urban houses. The real estate sector of India ranks 3rd among the 14 major sectors that have a direct and indirect impact on all sectors of the economy.

The year 2019 has been a period of ups and downs for the Indian Real Estate Sector. There have been various policy and taxation related announcements in the last year. The market experienced the impact of the ongoing Non-Banking Financial Company (NBFC) crisis which resulted in a liquidity crisis and a slow pace of recovery in sales. On the other hand, the successful launch of India’s first Real Estate Investment Trust (REIT) opened new avenues for investments in real estate while multiple government SOPs provided much relief to the housing sector.

Post the policy reforms of 2017 such as demonetization, RERA, and GST, the residential market is absorbing the impact of these changes and is on the path to recovery. India continues to retain its position as the world’s fastest major growing economy on the back of improved investor confidence and better policy reforms.

The growth of the Indian Real Estate Market in 2019 has been driven by numerous factors including technology, improved ease of doing business, dust settling post the implementation of reforms such as GST and RERA, and demand-supply dynamics, among others.

It is also expected that the real estate sector will incur more and more NRI Investments in both the short and long term.

In the year 2019, the realty sector has experienced its highs and lows. Affordable Housing performed beyond expectations within the residential segment, while the luxury apartments continued to witness subdued sales. On the other hand, the commercial segment saw most of the investment flowing in as the year comes to an end. Whereas, other asset classes such as warehousing, Coworking, and Co-living gained momentum.

Initiatives are taken By The Government

If we look back at 2019, we can not deny that the government did not make sincere efforts to strengthen the sector. A series of reforms and policy changes were adopted. Some of them are:

Reducing GST rates to 1% for affordable homes and 5% for under-construction flats/apartments
The announcements about NHB raising liquidity to the housing finance companies
Relaxation of External Commercial Borrowing (ECB) funds
Creation of Alternative Investment Fund of Rs 25,000 crore for Stalled Housing Projects
Successive Repo Rate cut coming to 9-years low (total 135 basis points in 2019)
Tax holiday to first time home buyers
Relaxation in FDI norms for a single brand retail
The government slashed the corporate tax rate to 25.17% from 30% for existing companies, and to 15% from 25% for new manufacturing companies.
In 2019, consolidation continued in the residential segment. Those developers who are either on the verge of insolvency or have their project stalled continued to re-enter the market through joint development, or mergers.
Technological advancement in real estate too increased in the last year.

Post-2017 reforms such as Real Estate (Development & Regulation) Act (RERA), the inventory pile-up kept increasing across markets. New launches had taken a hit. Increasing unsold inventory became a cause of concern as liquidity challenges coupled with RERA deadlines made it tougher to deliver the project. In spite of the odds, those with deep pockets or leading names in the realty sector continued to outperform in 2019.

Since the start of this calendar year, there is a decrease in unsold inventory, which is a positive sign for the industry’s revival. In 2020, this is likely to reduce further to healthy levels. Another crucial factor for improved sales was largely stagnant property prices. Going forward, we may witness investors, funds, and lenders showing confidence to finance future projects. If employment levels improve and inflation kept under check, the revival of the sector isn’t distant. The year 2020 may well be the turnaround year.

Market Size

The real estate sector in India is expected to reach a market size of US$ 1 trillion by 2030 from US$ 120 billion in 2017 and contribute 13% of the country’s GDP by 2025. Retail, hospitality and commercial real estate are also growing significantly, providing the much-needed infrastructure for India’s growing needs.

Housing Sector

As per the CBRE report, it is expected that out of the 2.3 lakh new unit launches in 2019 in the top 7 cities, nearly 40% or approximately 92,000 units were in the affordable segment, followed by mid-segment with a 33% share. The luxury and ultra-luxury segments amounted to the least share with 10% (approximately 23,000 new units). Apart from that, Center Approves 3.31 Lakh More Houses Under PMAY(U) to fulfill the housing needs of the Urban poorer.

Housing sales in 2019 saw a modest 4-5% annual growth with over 2.58 lakh homes sold during the year.
New housing launches in 2019 saw an 18-20% annual growth with over 2.3 lakh units.

Commercial Sector

As per the CBRE report, office leasing increased by more than 30% annually to cross 47 million sq.ft. during the first three quarters of 2019, exceeding its previous high of 2018. The leasing exercise reached about 15.4 million sq.ft. during Q3 2019, rising by nearly 23% on an annual basis.

Commercial office space continued to be the most sought-after asset class.

Forecast

Since the start of the year 2020, there is a drop in unsold inventory, which is a positive sign for the industry’s recovery. And it will probably see a growing trend in 2020. We expect the hurdles in the real estate sector to get resolved. Stagnant property prices was another factor for improved sales. Going ahead, we may clearly see investors, funds, and lending houses showing confidence to finance future projects. If employment levels improve and inflation remained under control, the recovery of the sector is not very far.

Real Estate Real Estate News Smart Residential Living

Real Estate Investment in India Bounce Nearly 9% in 2019

Dec 20,2019 / By Prahalad Singh / No Comment

Highlights:

Investment in India’s real estate market surged nearly 9% in 2019 compared to 2018 and reached $6.2 billion (Rs 43,780 crore).
The foreign funds estimated for nearly 78% of the overall investment in 2019, the highest share ever.
Office properties pulled 46% of the total inflow and raised nearly Rs 20,000 crore this year.
Bengaluru emerged to the 2nd place overtaking Delhi-NCR in terms of collecting investments with inflows of Rs 4,650 crore ($655 million) in 2019.
Mumbai managed the investments with a 25% share of the influx in 2019 and remains to be the most attractive investment destination in the country.

According to global property consultant colliers, investment in the Indian real estate market is estimated to jump by nearly 9% to Rs 43,780 crore during this calendar year on higher inflow from foreign private equity (PE) investors, including pension and sovereign funds, infused money despite the economic slowdown. The research shows that the foreign funds estimated for nearly 78% of the overall investment in 2019, the highest share ever.

Office properties pulled 46% of the total influx and raised nearly Rs 20,000 crore this year.

Colliers predicts that there is more growth ahead in 2020, admitting at a slower pace and investments inflows would total Rs 46,170 crore ($6.5 billion) or growth of nearly 5%.

The Rs 43,780 ($6.2 billion) investment in 2019 is however lower than what the Indian realty market received in 2017 i.e. $8 billion. Considering 2008, India’s real estate sector registered overall inflows of Rs 4,10,000 crore ($56.6 billion), according to Colliers. “After 2014, a bundle of reforms added such as the implementation of the Real Estate Regulatory Authority (RERA), the introduction of the Goods and Services Tax (GST), the rise of the Insolvency and Bankruptcy Code (IBC), and relaxation in foreign direct investment norms. These all reforms together have encouraged investor engagement in Indian real estate,” the firm says.

Global property consultant Colliers suggests investors look at opportunistic assets including under-construction office assets supported by strong demand signals in IT-influenced markets such as Bangalore, Pune, and Hyderabad giving enough possibilities to investors, said Managing Director and Chairman at Colliers International India, Sankey Prasad.

Office assets accounted for 46% of the total inflows during 2019 totaling Rs 19,900 crore ($2.8 billion) with the sector supported by strong demand signal and rental appreciation. The experts assume investors to remain focused on taking commercial office assets over the next 3-years supported by robust occupant demand and rental appreciation.

Besides Mumbai and Delhi/NCR, Bangalore should continue to rank among the most attractive commercial office markets. Bengaluru emerged to the 2nd place overtaking Delhi-NCR in terms of collecting investments with inflows of Rs 4,650 crore ($655 million) in 2019. And the consultant firm noted that the strong appetite for commercial office assets propelled Bangalore’s place to the 2nd in 2019 and believe that it should continue to be among the top 2-most attractive markets for investors over the next 2-years as funds continue to remain strong in commercial office assets

The consultant firm states that Mumbai managed the investments with a 25% share of the influx in 2019. The city of Mumbai remains to be the most attractive investment destination in the country by reason of an extensive range of asset classes, giving diverseness to investors’ portfolios.

Throughout 2020-2023, an annual average gross absorption at 52 million sq.ft. across the top 7-cities, exceeding the gross absorption of the past 5 years by 12%, projected by Colliers.

The report further said that there is a flurry of commercial investment activity in 2020 and 2021 as funds total assets to list them as real estate investment trusts (REITs).

While the commercial office sector is registering strong growth in investments, India’s residential real estate is undergoing a continued slowdown in investment size, considering only 9% of the total investments in 2019.

Colliers expects investments in the residential sector to continue soft during 2020, as money matters in non-banking financial companies (NBFCs) continue.

The firm also suggests that residential developers, including those with weak credit marks, were heavily dependent upon NBFCs to finance their projects over the last few years. And they believe that investors should continue to choose a conventional way towards residential assets, excluding a few top-tier developers, as the demand in the sector has not fully recovered yet.

Buying property Smart Residential Living

Is it a right choice to buy a property this Akshaya Tritiya?

Apr 18,2018 / By Priyanka / No Comment

We all know that Akshaya Tritiya is an auspicious occasion for buying gold and making such other investments. This day is considered auspicious for both donations and investment, Akshaya Tritiya is one of the three most religiously significant days in the Hindu calendar.

Homebuyers, looking for property, can make a purchase on this day and those, who have already bought a property, can do the Griha Pravesh ceremony on this day.

Reasons to buy a home during Akshaya Tritiya

Free goodies: Some developers are offering discounts on the base price. Some builders are offering freebies such as modular kitchen, electrical appliances, woodwork furnishing, gold coin, vehicle, etc., depending on the ticket size. Homebuyers can select these freebies to bring down the total cost of buying a property.

Lower interest rates: With low-interest rates given by the financial institutions, developers turn up with new schemes in housing projects making it an open wide road for homebuyers with low interest and more alternatives in housing plans.

Less risk-ratio: The property prices in most of the places in India have gone down for certain reasons rather growing. This reason makes it promising for home buyers who are a few steps away from having a property to buy one this year.

It also makes the properties affordable compared to the prices a few years back. The real estate market is now steady with reasonable property prices, so this is the right time to buy a property of your own.

Cities you can invest in this Akshaya Tritiya
Buyers should consider options, based on their investment, expected returns and risk capacity. Big cities and metropolitan regions involve large investment and the returns are comparatively lesser, in comparison to emerging cities, where the investment amount required is low, and the returns are quite higher.

The most attractive cities for investment in property are Pune, NCR, Vadodara, Jaipur, outskirts of Mumbai and all the developing localities where infrastructural development is making a big impact.

Above mention, cities are also attractive because of the rapid acceptance of commercial real estate in these markets. This gives clear signs for setting up of demand for the residential real estate, which normally lags the commercial segment by around one to two years.

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