Having faced a prolonged slowdown, the real estate segment has finally started showing signs of revival.
If you are one of those who had put their house buying plan on hold owing to the slump in the real estate market, then here is good news for you. Having faced a prolonged slowdown, the realty segment has finally started showing signs of revival.
As per a recent report by Knight Frank, almost after 7 years, the residential market – led by the affordable housing segment – recorded a recovery in 2018. Total residential sales during the year were estimated to be 242,328 units, registering a 6% increase over those of 2017, while the new units launched during 2018 rose by 75% to 182,207 units over those of 2017. The second half of 2018 saw a total of 89,500 new unit launches, up 119% compared to those of H2 2017, and 60% of all launches were within the Rs 50 lakh bracket, showing that developers are concentrating on the affordable and mid-ranged segment. However, while the residential sales growth remained modest, 2018 proved to be the best performing year historically for the commercial office segment with leasing crossing 46 MSF (million square feet).
In fact, regulations imposed by the government to ensure accountability on the developer such as RERA, GST and the Benami Act have discouraged speculators and laid the foundation of a healthy end users’ market. The government’s ‘Housing for All By 2022’ and the granting of infrastructure status to the affordable housing sector have also been aimed at boosting housing supply for the low and mid-income segments and improving affordability of the home-buyer.
“This period of stabilisation, right-sizing and right-pricing of new residential product and improving homebuyer sentiment due to increased transparency have culminated in a 76% YoY growth in units launched during 2018 and a more modest 6% YoY growth during the same period for sales. The half-yearly YoY growth in launches and sales was even more pronounced, thanks largely to an especially depressed H2 2017, at 119% and 10%, respectively, during H2 2018,” says the report.
The reduction in prices has, in fact, significantly improved home affordability, and average ticket sizes of housing units in most cities are now inching closer or are below the Knight Frank Affordability Benchmark of 4.5 times the annual household income of the city.
“While it would be presumptuous to consider the current periods’ growth in market traction as a turning point in the residential market’s fortunes, it does hold the promise of a more sustained recovery. However, developers still need to grapple with the funding crisis and buyer inertia that is a big threat to their financial survival in the short term. The government relaxing norms for NBFCs to liquidate their loan portfolios and contemplating the roll-back of taxes to reduce costs for the homebuyer will play its part in stimulating the market,” says Knight Frank.
It may be noted that ANAROCK Property Consultants had also recently said in a report that across the top 7 cities of India, a 3% rise in new housing launches and a 9% jump in buys were recorded in the Q3 of 2018 compared to Q2 of 2018, indicating that homebuyers’ sentiments are currently positive, although many of them may continue to wait and watch for some more time.
“In a logical paradox and as was expected, the very forces that put a serious dent in housing demand in 2018 are now resulting in renewed buyer confidence. There is no doubt that DeMo, RERA and GST disrupted the residential market sentiment over the short term. However, their intended effect was to give the housing market a sheen of respectability, accountability and transparency. This process is now underway, and fence-sitting homebuyers are responding positively. While the revival is very gradual, it is nevertheless evident,” says Anuj Puri, Chairman, ANAROCK Property Consultants.
According to Puri, while the arrival of GST has currently pushed the bulk of demand to ready-to-move-in homes and even resale options, the ongoing amendments to GST will now also serve to push up demand for under-construction housing by reputed, RERA-registered developers.
Property consultants and experts say that last year, developers were cautious in launching new projects, and in fact, focussed on construction of the existing projects at hand. Barring the last few months, NBFC funding helped developers work towards completion of launched projects, which in turn gave confidence to homebuyers since most of them are now quite wary of taking on any form of construction risk.
“Some of the cities like Mumbai and Pune have benefited from a proactive real estate regulator. In today’s clear-cut buyer’s market, discounts in the form of direct price cuts have prompted end-users waiting to buy to finally go-ahead. Most major cities in India saw developers willing to work towards improving sales by working on all fronts – price, size, and placement. Almost all new projects today are being realigned to fit the buyers budget. A majority of the traction, however, has been in the suburban locations of the cities,” says Divya Seth Maggu, Associate Director, Valuation & Advisory Services at Colliers International India.