How is the Indian Real Estate Going to Fare in 2019?

6 to 7 % of the country’s Gross Domestic Product (GDP) is attributed to the Real Estate, thereby making it a major industry of the economy. Besides, it also accounts for job empowerment to 52 million people and is likely to offer 15 million job openings in the following 5 years.

Both the Central and tate Governments well recognize the importance of this sector. The industry is expected to become more active with the introduction and focus on the the LIG, MIG and affordable housing schemes.

2019 may not see the Indian Real Estate sector get rid of the unsold inventory but that doesn’t set any negative note since the consolidation of the realty market will caue developers to come up with plans to benefit the end-users’ interests. Funding will continue to be a vital part of the industry. Prices may not increae due to the ongoing liquidity crisis. Although the growth of the Real Estate sector may remain uncertain in the immediate future, increasing transparency and affordability is sure to give it big highs in the long term.

What are the Positive Signs?

With the RERA, GST, IBC coming into effect back to back, the realty sector is now much transparent and accountability. It is paving its way towards perfection and with time will record a remarkable change.

The piled up inventory has curtailed by 13 to 15% with wise launches in the residential segment by players. The sector has witnessed a significant improvement in affordability after the valuation of assets remained stagnant over the previous 5 years.

The office space absorption and rentals have experience an increase in the cities. The major demand for office occupancies came from the financial, engineering, manufacturing services with the technology sector topping the charts. The industry has witnessed incerease in office rentals by 5 to 10% over these 5 years. The best part is that the demand is high in the top-notch office spaces.

What are the Cons?

The buyers have become more cautious which, is preventing them from acting impulsively. This is the cause for the asset class’s underperformance.

An increase in the NBFC’s funding cost has caused the developer’s expense to rise, resulting in low returns and an environment of weak pricing, consequently.

Affordable Housing

90% of the shortage in housing is present in the low-income and economically weak segments, thereby creating opportunities for developers. This will allow the buyers to avail of lesser GST rates and low-cost home loans. On the other hand, the developers will benefit from favourable tax rates. The residential segment will majorly be driven by affordablr housing this year.

Organised developers who adapt their business to the new standards, are expected to witnes gains in market share. According to an expert analysis, the market share of the biggest ten players is anticipated to rise to 40 % in Mumbai from the existing 20%.

Capital Made Available by REIT

Despite the availability of office space market worth 75 billion dollars, only 30 billion dollars could be tapped through REIT channel. The total Grade A office space available in the country, measures an area of 550 million square feet while 77 million square feet is alloted to retail malls at a total value of 16 billion dollars. 5 billion dollars could be used by the developers by tapping the REIT channel. Other sectors too will be permitted to unlock commercial realty, by the REIT, through partial liquidation of portfolios.

The Risks

Tackling cash deficits over 2016 to 2018, the Non-Banking Financial Companies posted a 35% CAGR on the developer funding. Developers are required to meet the deficiency of funds by enhancing collections. With the number of refinancing lines becoming lesser, the funding costs have risen. In the meanwhile, the slow recovery of the Real Estate may result in defaults in spite of the justification in prices.

RERA Not Fully Active

The RERA rules aren’t fully functional in all the States and Union Teritorries of India while many have implemented the weakened versions of the norms. As a result, the customers are still lacking in confidence due to delay in the completion of projects.

But is it the best moment for purchasing your dream home whether for your own use or investment purpose.

Abundant supply of the resindential sector followed by slow demand, has kept this segment in a mess. It is struggling against the liquidity crunch, which is an after-effect of the IL & FS default. Besides, a chain of projects remain stalled, sales are not at par and the cost of capital is high.

As explained by the Chairman of India’s leading property consultant, prices are likely to start appreciating after some time despite the pick up of sales at present.

The significant decline in prices is a cause for the buyers to rejoice while developers are focusing on engaging genuine buyers.

Experts analyze the full-fledged recovery of the residential market at least 1 and a half years later due to the ongoing liquidity crisis and slow sales than was expected. Funding has become a major hindrance to the completion of under-construction projects and a great many are thus, getting stalled. This has been followed by a drastic fall in the number of new launches.

Which is the Best Performing Real Estate Asset?

Definitely, the first class office spaces are the best performeners if you are looking to invest in them for promising returns.

The culture of start-up businesses, especially by the women of India, made easy by the proactive initiatives of the Government. Hot office properties at prime locations have experienced exceptionally high demand and absorption. The rental yield in certain markets surged to almost 10% , as reported by the aforementioned property consultant.

Commercial Segment to Allow Investment in Small Ticket Sizes

The forthcoming announcement of the country’s first REIT listings will no more discourage investors with a budget of even 2 lakhs from investing in the commercial properties with steep ticket sizes. The listings will act as mutual funds.

Whether you are looking for office space or 3 bhk flats in Kolkata, get in touch with Apart from our helpful and appropriate solutions for property buying or selling, we will keep you updated with the least of improvement in the realty sector, as and when it happens.

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