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.

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ICRA: NBFC crisis to lower home loan growth for the first time in 3 years

Jun 17,2019 / By Prahalad Singh / No Comment

ICRA: NBFC crisis to lower home loan growth

The current liquidity crisis suffered by the Non-banking Financial Companies (NBFC) is expected to lower home loan growth to 13-15% this fiscal, according to a recent report released by rating agency ICRA that is lower than the average of the previous 3 years.

As per the Investment Information and Credit Rating Agency (ICRA), the NBFC liquidity crunch can also have an unfavourable result on outstanding home loans, which reached Rs.19.1 lakh crore as of March 2019.

The overall industry loan growth for Housing Finance Companies (HFC) had backed off to 15% for 2018 financial. It said that the issue with the non-banking lenders since last September that has seen a huge number of companies like DHFL and Reliance Capital suffering has lowered down credit growth of committed housing finance companies to 10% in 2019 fiscal.

Banks developed faster at 19% as against 13%, taking their overall market share to 64% from 62% last fiscal, it stated that the adding banks will lead the growth curve in 2020 fiscal. In any case, given the under-penetration of home loans, the agency expects that development should recover soon. The gross Non-performing Assets (NPA) ratio from the overall housing finance exposures increased to 1.5 in March 2019, from 1.1 last year.

The agency suggested that there could be some pressure on the nature of the assets due to the difficult working conditions and the rising risk factor. The overall NPAs of HFCs will grow to up to 1.8 % due to concerned faced by some developers.

Growth in affordable new housing segment dipped to 4.6 % as of March 2019 from 5% as of December 2018 criticising the same to devalue and sale of NPAs by some players.

HFCs would require Rs.4 to 4.5 trillion in Financial Year 2020 to meet the growing necessity of 10 to 14%, adding that companies will have to resort to securitization.

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Earth caves in under one of Bangalore’s posh high rises- 32 flats evacuated

Jun 16,2015 / By Team Commonfloor Groups / No Comment

People living in high rises have one nagging fear, their building being one of the firsts to collapse in the face of an earthquake. June 15th was one such day for the residents of the posh Queens Corner Apartments. Tremors were felt and with vivid images of the Nepal earthquake still fresh it was found out much to their dismay that a large section of the compound wall had collapsed along with a huge tree which even created cracks on the building. The collapse has affected not only apartments of Queens Corner but also the houses in the neighboring Income Tax Colony.

The reason is stated to be a huge excavation which was done very close to Queens Corner for the construction of a 20 storey building by Legacy Projects. However, residents are also saying that a large pipe which is close to 15 inch in diameter has been leaking for more than 10 days which had been left unattended in spite of making repeated complaints to the BWSSB and this has resulted in the earth loosening further caving in the earth and hollowing out a major section of area. So there’s this one enormous pit dug out by Legacy Global Projects Pvt. Ltd. for an apartment complex in the adjoining plot and the huge crater just below Queens Corner due to the earth caving in. The hollow which is about 15-feet deep just near block C of Queens Apartment have sacred the residents out of their living dreams and 32 flats of an entire block in Queens Corner apartment, Queens Circle were evacuated along with many residents of the affected Income Tax Colony. Residents evacuated from Queens Colony has either moved to hotels or homes of relatives while residents of the Income Tax Colony has been shifted to guest houses.

Lal Mirpuri, president of residents’ association of Queens Corner stated that repeated complaints had been made not only to BWSSB for fixing the leaking pipe but also to Legacy Projects just after they had dug out the huge pit which had resulted in cracks in their building. As per Defence News India, He also claimed that the association members had made several requests to Legacy Projects for building retention walls in the pit they had dug but all in vain. However, Legacy Global Projects claimed that the large concrete pylons they had built against the mud wall had also collapsed in the accident.
Legal action has already been taken and the builder has been booked under section 336 of the Indian Penal Code for an act endangering life or personal safety of others.

What would you do if something like this happens near your housing society? Any proactive way to deal with such situations?

Source :- http://goo.gl/jDfoHR

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