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

Indian Real estate round-up 2019

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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Nirmala Sitharaman Discloses Plan For Rs 102 Lakh Crore Infra Projects

Rs 102 lakh crore investment in Infra Projects

Nirmala Sitharaman’s Press Conference Highlights:

  • Govt plans to invest about Rs 102 lakh crore in the infrastructure sector in the next 5-years to achieve a target of $5 trillion by 2024-25
  • Finance Minister Nirmala Sitharaman states India will carry annual global investors meet in 2020
  • Irrigation and rural infrastructure projects would consider for Rs 7.7 lakh crore each
  • On industrial infrastructure, Rs 3.07 lakh crore would be disbursed
  • Agriculture and social infrastructure would consider for the remainder
  • Road projects will estimate for Rs 19.63 lakh crore
  • For railway projects, Rs 13.68 lakh crore would be spent

FM Nirmala Sitharaman said at a press conference on Tuesday that as per Prime Minister Narendra Modi’s commitment at the 73rd Independence Day speech to make India a $5 trillion economy. The government had identified infrastructure projects pipeline worth more than Rs 105 lakh crore to be implemented for the next 5 years as part of the government’s ambition of turning India into a $5 trillion economy by 2024-25. It will also serve as one of the important drivers of faster economic growth.

She further added that the projects have been classified under two broad categories i.e. economic infrastructure and social infrastructure for both ease of doing business and ease of living.

Infra projects identified are in the sector such as power, health, urban irrigation, railway, mobility, and education.

Under National Infrastructure Pipeline (NIP), the govt has also identified approximately Rs 25 lakh crore energy projects, another Rs 20 lakh crore in the road, almost Rs 14 lakh crore railway projects, Rs 2.5 lakh crore port and airport projects, Rs 3.2 lakh crore digital infra projects, Rs 16 lakh crore irrigation, rural, Agri and food processing projects, and over Rs 16 lakh crore infra projects including mobility projects.

The Finance Ministry had established a task force directed by Economic Affairs Secretary to plan a road map for the “national infrastructure pipeline” from 2019-20 to 2024-25 under Rs 100 lakh crore infra plan.

The government believes that with more and more States/UTs submitting their proposals so that another Rs 3 lakh crore worth projects are expected to be added in this pipeline by the states to make it the total to Rs 105 lakh crore.

The minister also said that the annual global investors’ event would be organized where Centre and States would get a chance to meet all the investors and to talk to them about infrastructure possibilities.

These projects are on the top of Rs 51 lakh crore spent by the center and the states during the last 6 years. Adding the new infra pipelines consists of 39% projects each by the center and states and the remaining 22% by the private sector.

National Infrastructure Pipeline (NIP) is a booklet prepared by a task force that gives details of infrastructure projects in which the energy sectors make up the lion’s share of 24% followed by roads 19%, urban irrigation & development 16%, and railways (13%). The shares of rural and social infrastructure projects, which include health, education, and drinking water, is 8% and 3% respectively.

The government hopes that the huge investment will help drive economic growth which decelerated to 4.5% in the 3rd quarter ended in September, the slowest pace in the last 6 years and the 6th consecutive quarterly decline in a row. The Finance Ministry has taken as much as 32 measures since August 2019 to boost the economy, including corporate tax cuts at a cost of Rs 1.45 lakh crore to the exchequer to attract investments, approved 3.31 lakh more houses under PMAY (U) and about Rs 5 lakh crore in disbursal of bank loans since October to encourage demand.

A Finance Ministry statement said that out of the total expected capital expenditure of Rs 102 lakh crore, projects worth Rs 42.7 lakh crore (42%) under implementation, projects worth Rs 32.7 lakh crore (32%) are in the conceptualization stage and rest are under development.

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Japan’s Sumitomo bids record Rs.2238 crore for 3-acre BKC plot

BKC

Japan’s Sumitomo bids record Rs.2238 crore for 3-acre BKC plot

In one of the biggest investments by an international firm in the Maharashtra realty sector, Japanese major Sumitomo Corporation has purchased a 3-acre plot in the prime locality of Bandra-Kurla Complex (BKC), Mumbai for Rs.2238 crore.

It ends up to around Rs.745 crore per acre and maybe the largest per-acre land deal in BKC, India. The last time a notable bid was placed was in 2010 when the Mumbai’s realty major Lodha Group offered Rs.653 crore per acre for a 6.2-acre (the total bid was for Rs.4050 crore for the (MMRDA plot) land parcel in Wadala, Mumbai. The reserve price for the plot was decided at Rs.3.44 lakh per sq.m.

The plot, “C-65”, relates to the Mumbai Metropolitan Region Development Authority and an offer letter for it was assigned to Goisu Realty Pvt. Ltd. for an 80 years contract. As per the MMRDA official, Sumitomo was the sole bidder for this plot. MMRDA did not find any bidder among local developers even after it had been put on the block for many months due to the liquidity crisis in the local property market.

Founded in 1919, the Tokyo-headquartered Sumitomo Corporation is span across Japan, Asia, Europe, America, Africa, East Asia, and other countries globally, dealing in infrastructure,  transportation and construction systems, realty, chemicals, minerals, energy, metal products, and media.

Maharashtra Chief Minister Devendra Fadnavis and other senior officials from the state government, MMRDA and the representatives from the buyer’s front were already on the event.

As per the property expert, Sumitomo has given an insane price as the company wants to present in a prime commercial market like Bandra Kurla Complex (BKC), Mumbai. The diversified business magnate plans to build a commercial office complex, which might house its Indian units as well.

The MMRDA official said that Sumitomo will be allowed to use a floor space index (FSI) 4 on the plot, providing it with a built-up area of close to 10 lakh sq.ft.

Maharashtra Chief Minister Devendra Fadnavis called the deal as a “win-win” for both MMRDA and Sumitomo, which has opened a new door for global investors. And many more global corporates are expected to show interest in investing in the BKC in central Mumbai with easy connectivity to the eastern and western suburbs and south Mumbai, Maharashtra.

Image Sources: Google

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