Will Real estate in India bounce back?

In the last 4-5 years, the Indian real estate industry went through major transformations in terms of growth in prices and sales. New policies and certain decisions taken by the Indian government have affected the real estate sector in a challenging way. Starting from laws that were aimed at increasing transparency and accountability like RERA (Real Estate Regulation and Development) and GST; to the ones like demonetization that were aimed at curbing black money, the impact on Real Estate sector has been hard.
As per Anarock research, in 2017, 1.6 lakh units were sold during Q1-Q3 2017. The decline in sales was about 30% compared to Q1-Q3 2016. On the other hand, during the same period, the drop in the addition of new inventory was almost 50% in 2017 as compared to 2016.
Real estate market is going through a transitional phase and the reforms are contributing to create a more consumer friendly market. Even though we may not see an exciting residential market recovery in the immediate term, whatever recovery and growth we see from here onward is likely to be sustainable and backed by stronger market fundamentals than before. India has climbed 30 positions to procure the 100th position on the World Bank’s size of nations in Ease of Doing Business for 2018.
The extent to which the real estate sector has grown can be gauged from investments in ‘under construction’ projects within investment grade real estate. This worth of such projects grew from about USD 173.9 billion in Q4 2012, to USD 242.6 billion in Q2 2018.
Further the government’s push towards development of rural and urban housing through policy initiatives like ‘Housing for All’; and the way it is assigning capital under ‘Pradhan Mantri Awaas Yojana’, gives a signal of a more robust and stable real estate market to come. The ministry has approved construction of over 28.5 lakh affordable homes for economically weaker section, low income group and middle income group with an investment of over Rs. 1,54,000 Crore. A central assistance of over Rs. 44,000 crore had also been approved for these houses.
With the definition of Affordable Housing modified to include a portion of houses classified under mid income group a larger buyer base has become addressable under this category. Further, the infrastructure status provided to this segment will help developers sell their budget homes inventory in a better manner.

Reports by FICCI- NAREDCO-Knight Frank (Q4-2017) have indicated some green shoots. Micro-markets in cities like Mumbai, Pune and Bengaluru have shown capital appreciation of as much as 15% (absolute) and more. At the same time, other micro-markets have under-performed and even depreciated. In the same vein, residential leasing returns have also risen, but contingent on factors like location and quality of assets. Houses in same localities can get different rents based on how well maintained the properties are. The growth of professional property management like what we provide at Reniso (www.reniso.com) not only ensures good health of assets but also translate into higher rental and sale returns. Moreover, the tech-based approach and superior asset tracking provides complete peace of mind to the owners and better convenience to tenants. Real estate is more than just sale & purchase of the assets. New age startups are bringing the asset management approach to property owners which is a 3-step mantra- Value preservation, Value enhancement and lastly Value realization. These startups can bring about a change in the mindsets of customers accustomed to traditional sale & purchase philosophy.
Overall, strong economic fundamentals, proactive reforms and the use of technology will continue to boost the sector. Apart from the conventional sectors, the emergence of alternative segment (student housing and co living) will be the drivers for vigorous development and a promising future for the sector.
Largely, it may not be wrong to say that the markets are showing signs of reversal as the dust around RERA and GST settles. Further, these reforms are making sure that only serious buyers and serious developers participate, thus helping develop a more qualified scenario that is away from speculative trends. The days of 20-30% returns on property are long over, but surely the signs of revival are visible and should grow, based on the sustainable and strong market fundamentals. All in all, the year will remain a good time to buy selectively by choosing the right inventory, wherein specialized advisory like offered by Reniso (www.reniso.com) can make the difference. Our expertise and understanding of markets, including nuances of micro-markets helps guide our customers make smart decisions to beat the existing trends. Further our specialized property management services ensure that each of our managed properties gives higher rental yields, has ownership costs and generate higher above average returns when sold.

Our specialized managers can be contacted at +91-8585986860 (phone) and contact@reniso.com(email).
Happy Investing!

Sources:
1. FICCI: http://ficci.in/pressrelease-page.asp?nid=3213
2. Entrepreneur.com https://www.entrepreneur.com/article/306654
3. Economic Times: https://realty.economictimes.indiatimes.com/news/industry/real-estate-sector-will-bounce-back-soon-housing-minister/60965198
4. Livemint: https://www.livemint.com/Money/IPQvKo1HYuZVzBkzCHcaXO/When-it-makes-sense-for-you-to-invest-in-commercial-property.html

By | 2018-10-27T11:42:35+00:00 October 27th, 2018|Articles|0 Comments

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