In recent times the real estate industry has gone through myriad changes and these are in tandem with the global trend. Although after the global recession in 2008 when the world economies toppled, the effects were felt by the real estate sector of India too but post-recession, the state that the real estate industry is in today can be attributed to our own making of the industry. Just after the recession, the real estate industry got a jolt but again decelerated and till 2017 the lull was prevalent. The graph below would depict the point across.
As we see above from 2012 onwards, the sales of the real estate industry started dipping and from then onwards it was an established fact that the market sentiments are down. After 2017 the sales did take an upward turn as the sentiments were hauled higher up by the government measures like RERA, GST, etc. But now as the situation turns out to be, the buyers are hesitant to buy real estate, homes or properties as the new launches are down and even then the unsold stock in the past five years has surged up by 2.5 percent.
The dip in the real estate sentiments and the plunge of the market conditions are evident from the units sold and the comparison between the years 2011 and 2017 as shown in the graph above. The dip from the year 2011 to 2017 was in the order of 34 percent. This was analyzed by the realtors and the realization dawned that the market probably is not catering to the demand of the buyers and accordingly the products were tailor-made. The realtors’ orientation to the luxury and the super-luxury segment and the products which were aimed at the high-income levels were diverted to the affordable segment.
The real estate developers of all the sections of the country started constructing more affordable homes than the super-luxury ones. Data sources say that 60 percent of the apartment stock in 2018 is in the category of under Rs. 50 lakhs bracket. Undoubtedly, the market was also positively affected by the government measures and the financial measures like the CLSS scheme of the government like the Pradhan Mantra Awas Yojna increased affordability and pumped in liquidity to the sector. The effects from all the government measures and the efforts of the developers as well, as they flaunted more discounts, resulted in the growth of sales of the real estate sector by 6 percent in 2018 compared to 2017.
The experts believe that this minuscule growth of 6 percent can be attributed to the liquidity crisis which became starker because of the liquidity crisis in the NBFC sector. The reason is, this sector used to be the lifeblood of both the developers and the end-users and investors. This is the first reason attributed by the expert realtors for the sluggish growth in sales in the year 2018 compared to 2017 who believe that it could have been much better.
This makes the year 2019 look far more prospective as the elections are over and a stable government is at the centre. The next factor that supports the hope of renewed growth of the real estate industry is the government’s budget which has taken additional measures to rejuvenate the liquidity crisis of the NBFC sector. The GST is also reduced and with the tax rebates for the affordable sector, the budget also has proved to be boosting the buyers’ sentiments and the affordability assessment of the end-users. Further, the repo rate reduction in the very recent times by the RBI would also facilitate the buyers to procure loans at a much lower rate as disbursed by the banks. All these measures and factors certainly would help the realty sector to boost the sales and increase its much-awaited boom time and it can be expected that this year, the rate of growth would be certainly higher.