Expect a steady recovery in Indian real estate over the next 18 months

Expect a steady recovery in Indian real estate over the next 18 months

The five-pronged approach by the government comprising of demonetisation, RERA, GST, home loan rate cut and affordable housing push is geared to bring the mojo back into the industry.

As I have described in another article, the last 14 years have been a roller-coaster ride for Indian residential real estate market. The period between 2003 and 2008 was a boom time with prices increasing, almost doubling in some cases.

After a two-year slowdown arising from the global economic crash, 2010-2014 again saw huge supply and prices rising again. The final three to four years of this period have witnessed the dip of the business cycle, with sales having slowed down to half, unsold inventory increasing, and prices remaining flat.

This was also the period when the consumer became increasingly unhappy with the developer community, with a spate of false promises and project delays. The investor community, taking a cue from this, and buoyed by rising equity markets, also voted with their feet on the real estate market.

As per PropTiger’s DataLabs Realty Decoded Report, developers in the top nine cities of India had been together launching 40-45,000 homes (units) in each of the first three quarters of FY17 (Apr 2016-Dec 2016), including in the dreaded third quarter when demonetisation took place.

The first three months of 2017 saw about 51,000 units being launched, possibly on the back of improved sentiment post demonetisation and some to get in before RERA got implemented.

Launches crashed to about 30,000 units in April to June this year, as developers got busy with applying for RERA approvals for existing ongoing projects. RERA has been implemented by the book only in Maharashtra, and hence the pains of RERA will continue to bog down developers in other cities. Hence, launches will continue to be soft in Q2 of FY18 (July-Sep), and possibly even lower than Q1 level of 30,000. After that, launches will follow sales as described below.

Purchase of homes on the other hand had been fairly stable at 50-55,000 in each of the six quarters before the note ban quarter. It’s a well-known fact that after note ban, consumers started waiting for a mythical and misguided 30 percent price correction and this slowed down purchases to about 43,000 units in the October-December 2016 quarter. October 2016 was one of the best months in the past two years, which means that November-December sales fell down to almost 10,000 units per month. As the canard of a huge price fall wore off, sales have recovered in the January-June 2017 period to the 50-55,000 level of earlier.

Now going forward, the five-pronged approach by the government, comprising of demonetisation, RERA, GST, home loan rate cut and affordable housing push, all in the past 10 months, is geared to bring the mojo back into the industry.

These five factors coupled with the reduced real prices of homes and increased affordability will dictate the outlook for the next six months and even the next three to four years. RERA and demonetisation address comprehensively the crisis of consumer confidence developed over the past three to four years.

Consumers buying new homes now are getting what they saw, what was promised to them, paying in white, and in a committed time-frame. We forecast sales in July-September remaining at similar levels of Q1, with Mumbai and Pune increasing while other cities (where RERA is running three months behind) falling a bit.

The third quarter (Oct-Dec) which is also the festive season is going to be the quarter which may be remembered as the turning point, with consumers coming back in droves into the “buy” market. I see anything between 60,000 and 70,000 homes being purchased in this quarter, tempering down to 55,000-65,000 in the final quarter of FY18.

In the next fiscal (Apr 2018-March 2019), there is a good chance that the industry may see 65,000-75,000 units being sold each quarter, with a bump-up in Q3. Hence, sales of homes which hit a seven-year low of 2.1 lakh numbers in FY17 and possibly remaining at that level in FY18 too, will bounce back to the 3 lakh range in FY19.

This will still be a far cry from the investor-driven 4.5 lakh units sold in FY14, but this time around, the demand should comprise a significant portion of solid end-users. In the past four years, lakhs of new entrants into the workforce have moved into the top nine cities, but have been reluctant to buy. Even this segment will enter the market now. As foreign institutional investors and private equity funds start entering the space – after clean-up and with a price increase imminent in FY19 – prices may start rising and domestic retail investors will come back, with prospects for capital appreciation returning to this asset class.

Investors returning in droves of course depend on how well equities are doing and very importantly, when the Indian government is able to bring the GDP growth back on track through a slew of economic reforms.

Even the Asian Development Bank has revised India’s growth from 7.4 percent to 7 percent due to demonetization and GST impact but the government is expected to introduce reforms to revive growth. I am positive on both counts – the Indian government’s actions (with elections around the corner) and the ability of the United Nations and international statesmen helping avoid a North Korean war. It will be time for both real estate and equities to prosper! Let’s cross our fingers and wait for each of the above forecasts to come true! India needs it…India deserves it!

Gurgaon: MCG under fresh scanner over awarding tender to PR firm

Gurgaon: MCG under fresh scanner over awarding tender to PR firm

The Municipal Corporation of Gurugram (MCG) has come under scanner yet again as the Chief Minister’s Office has marked a vigilance enquiry pertaining to the issuing of a tender to a public relations (PR) agency following a complaint by a city-based social activist.

As per the complaint by social activist Harinder Dhingra to Chief minister Manohar Lal Khattar, a copy Continue reading “Gurgaon: MCG under fresh scanner over awarding tender to PR firm”

What investors should know about investing in real estate

What investors should know about investing in real estate

Amit’s eyes shone as Rishabh told him about the 300% gain he made on selling his property at Whitefield, Bangalore. He had bought it for Rs 30 lakh in 2002 and sold it for more than a crore recently. Amit decided that real estate is the asset class he should be investing in! Such statements and cases are not uncommon. Though the gain figure looks quite impressive, there are many things a smart investor who is looking to build his Continue reading “What investors should know about investing in real estate”

DLF’s Kushal Pal Singh is India’s wealthiest real estate baron: Hurun

DLF’s Kushal Pal Singh is India’s wealthiest real estate baron: Hurun

Delhi-based real estate tycoon Kushal Pal Singh of DLF was named as the top real estate entrepreneur this year on the Grohe Hurun India Real Estate Rich List, where 60 per cent of the list comprises first generation entrepreneurs. Singh, 87, is the wealthiest real estate baron in the country with a fortune of Continue reading “DLF’s Kushal Pal Singh is India’s wealthiest real estate baron: Hurun”

RBI rate cut could have boosted demand in real estate during the festival season, say developers

RBI rate cut could have boosted demand in real estate during the festival season, say developers

Real estate developers are disappointed that the Reserve Bank of India chose to maintain status quo on policy rates announced on Wednesday. They point that a rate cut would have provided a cushion for the economy and also much needed zing during the current festival Continue reading “RBI rate cut could have boosted demand in real estate during the festival season, say developers”

Godrej Properties in pact for new realty project in Pune

Godrej Properties in pact for new realty project in Pune

NEW DELHI – Realty firm Godrej Properties Ltd today said it has entered into a partnership agreement to develop a residential project in Pune.

The company, the real estate firm of the Godrej group, will develop a housing project on 59 acres at Mamurdi in West Pune. It did not disclose the name of the partner in Continue reading “Godrej Properties in pact for new realty project in Pune”

Annual real estate supply in India expected to increase to 8.2 bn sq ft by 2025

Annual real estate supply in India expected to increase to 8.2 bn sq ft by 2025

Share of the real estate sector in India’s GDP expected to double by 2025 and jobs likely to increase by more than 80 percent by 2025.

Increasing urbanisation and transformation of the real estate sector from a largely fragmented to an organised one, thanks largely due to regulatory reforms such as RERA and GST, is expected to increase the annual real estate supply in India from about 3.6 billion sq ft in 2013 to about 8.2 billion sq ft in 2025. This will also impact the growth of jobs that is likely to see a spurt of over 80 percent by 2025, Continue reading “Annual real estate supply in India expected to increase to 8.2 bn sq ft by 2025”

Six Ways Real Estate Professionals Can Keep Growing And Learning

Six Ways Real Estate Professionals Can Keep Growing And Learning

Staying on top of industry changes and new developments is crucial, especially in a business with so much on the line. Changes in local economies, housing needs or zoning issues can seriously impact investments. Developments in customer service aspects — new approaches or tools to help clients find what they need, and then walk away happy — can mean the difference between keeping people  Continue reading “Six Ways Real Estate Professionals Can Keep Growing And Learning”