Indian real estate sector witnessed a challenge both for the builders and the buyers in 2017. First of all, demonetization brought almost a halt in the cash transactions and pushed the digital transactions instead, plummeting the cash component in realty deals drastically. RERA was another inhibiting act that had put the transactions to almost on hold as the stakeholders and the buyers wanted to observe the impact of Real Estate Regulatory Act on the realty sector.
Immediately following the RERA, GST was implemented and only from the festive season in the last quarter of the year, the buyers started becoming a bit active. The first half of the year witnessed slow sales with the middle of the year marked with a slow take-off and at the end, this sector started sliding back to normalcy.
The upheavals in 2017 happened due to the numerous policy reforms like RERA, GST, and demonetization.Specific to the realty sector, various measures were taken like Pradhan Mantri Awas Yojna (PMAY Scheme), relaxations for affordable housing projects and its carpet area in the annual budget, etc. These measures and schemes were adopted to bring about transparency in the real estate sector boosting both the investor and the consumers’ confidence. In reality, the investors’ confidence drooped down in the face of so many laws and reforms who wanted to watch and monitor the performance of the sector before investing.
In 2018, the real estate projects have already come under the ambit of RERA and this could help the prices to be more stable. More transparency may result in the timely completion of the projects with the real estate demand and supply curve synchronizing fairly than in the past.
The research studies that have already been conducted and the statistical results that have poured in, points out that in the first quarter of 2018, more residential units were sold in the top seven cities of India including the four metros and Bengaluru, Hyderabad and Pune. The reason is from the last half of 2017, the prices have been quite stable for a sustained period of time. The lending rates of the banks have also been reduced significantly since 2015 reducing it to a rate that’s lowest in the decade. This has posed an opportunity for the buyers and the by watchers not only to buy but service their EMI’s easily as well.
At the end of 2017, the unsold units were estimated to be pretty high in the top cities of India with Delhi accounting for the highest unsold units and Kolkata for the lowest. Because of the significant volume of unsold inventory, the buyers would surely prefer projects nearing completion and completed projects with the reports speculating that the unsold units would be sold out in the next few quarters. This was projected to inevitably help the capital values to remain stable with a downward trend which makes the market seemingly favorable for the buyers.
The demand for office spaces also remained quite high and experienced a rapid pace of growth. The analysts feel that the market for office leasing will also remain fairly robust with high demand in 2018 as with the economic reforms in the last few years, the employment growth had been quite strong. Rentals for office space also remain fairly stable in the upcoming years with a higher demand of the Grade-A commercial space due to restricted supply.
The analysts feel that due to limited transaction volumes in the office space segment the capital values are very likely to remain fairly stable in the year 2018, with an expected 5 – 10% increase in the next three years. Another trend that can be noted is the growth of tier-2 cities and their increased demand for commercial projects and office spaces. The trends indicate that there will be more investment in the commercial projects in the tier-2 cities of India where more developers would invest.
Undoubtedly, the year 2018 will be the year of change and of major execution. With the RERA in force and lot of projects running behind the schedule, the supply will also be more in the major cities and markets of India. There will be pressure on the developers to primarily deliver the existing projects rather than opting for the new launches.
There would be more emphasis on joint ventures and joint real estate project developments which would bring down cost and make land acquisition easier. Conforming to the laws and the reforms of the realty sector may turn out to be difficult for the small and few medium sized real estate developers which might force the builders who are in distress to be taken over by the large players. This trend may bring more transparency and help in resettling the market with more fair practices.
With all these challenges that 2018 may bring which may not be very comforting for the builders, the ones who would be able to embrace the changes and adapt to the market dynamics would eventually grow.
- The realty sector went through major upheavals in 2017 due to numerous policy reforms like RERA, GST, and demonetization and reformatory measures like Pradhan Mantri Awas Yojna (PMAY), relaxations for affordable housing projects and its carpet area in the annual budget, etc.
- These measures and schemes were adopted to bring about transparency to boost the investor and the consumers’ confidence but in reality, the investors’ confidence plummeted in the face of drastic change.
- More transparency may result in the timely completion of the projects with the real estate demand and supply curve synchronizing fairly, than in the past.
- 2018 will be the year of change with the RERA in force and lot of projects running behind the schedule, the supply will also be more in the major cities and markets of India.
- There will be pressure on the developers to primarily deliver the existing projects rather than opting for the new launches.
- With all these challenges that 2018 may bring which may not be very comforting for the builders, the ones who would be able to embrace the changes and adapt to the market dynamics would eventually grow.