The year 2018 has been a mixed bag for the real estate sector with homebuyers gaining in the form of better bargaining power and developers facing several challenges, including one of liquidity.
“Homebuyers gained in terms of better bargaining power, right pricing and ready-to-move-in properties. High inventory may be bad for developers, but supplies helped in keeping prices under control. So many end-users, who kept away from buying a house, could do so in 2019,” said Pankaj Kapoor, Founder & MD, Liases Foras.
In the commercial office space segment, leasing activity improved in double digits and on the residential front, absorption rose in the key cities of Mumbai, Bengaluru, Chennai, Hyderabad, NCR and Pune. As per Lises Foras data, housing unit sales in 2018 increased 11% over the previous year.
Greater transparency
There was also greater transparency in the sector on account of stringent policies put in place for the protection of homebuyers.
The credit linked subsidy scheme (CLSS), under the Pradhan Mantri Awas Yojana, meant to provide housing at affordable prices to the middle and low income groups, also provided a boost to the sector.
A draft prospectus for the launch of first REIT (real estate investment trust) was filed with SEBI, providing a new investment route.
“This would improve the cash flow in the sector. Likewise, liberalisation of FDI norms will further improve the cash flow and create a robust environment,” said Anshuman Magazine, chairman, India and South-East Asia, CBRE.
Developers under stress
After short-term disruptions caused by introduction of key policy reforms in 2017, the sector witnessed a revival in sales in 2018. However, developers remained under stress due to liquidity woes caused by NBFC crisis and increased compliance with RERA (Real Estate (Regulation and Development) Act 2016.
“Some of the challenges which the real estate industry faced were in the form of tightening liquidity in the NBFC sector and lack of quality supply, especially in the retail sector. Slow pace of infrastructure development, too, was an area of concern. Similarly, the global headwinds also were an area of concern,” he said.
Parth Mehta, managing director, Paradigm Realty said while ‘Housing for all by 2020’ created an upsurge in supply of residential projects, the undue hardships such as the NBFC liquidity crunch, lukewarm income growth leading to slowdown in demand, rising interest rates and higher GST implication caused trouble for developers and homebuyers.
“This year has definitely been a roller coaster ride for the real estate sector not only for the developers but the buyers too,” Mr. Mehta said.
Khushru Jijina, MD, Piramal Capital and Housing Finance said “2018 was a moderate year for the real estate sector with various external shocks like demonetisation, RERA and GST affecting buyer confidence across markets, even though the longer-term impact of these regulatory measures was seen to be largely positive.”
The preceding quarter also saw an IL&FS default resulting in a liquidity crisis for the financial markets, most particularly impacting housing finance companies and NBFCs alike.
Against this backdrop, 2019 is likely to start on a moderate note with the sentiment remaining muted in the run up to the upcoming general elections.
During the year, India led in the flexible space market across APAC region. The overall stock of flexible space market in India increased by about 50%, from almost 10 million sq. ft. in 2017 to about 15 million sq. ft. by Q3 2018.
“Bengaluru and Delhi-NCR were the largest markets for flexible spaces in India, with a combined share of almost 55% in overall leasing by flexible space operators,” Mr. Magazine said.
The retail sector also absorbed a large amount of real estate.
The cities that saw maximum retail growth in 2018 included MMR, NCR, Bengaluru and Kolkata.“Besides commercial office spaces, the retail sector also emerged as one of the most vibrant and fast-paced real estate sectors in India in 2018,” said Anuj Kejriwal, MD & CEO, retail, Anarock Property Consultants.
“[The year] 2018 was a year of stabilisation of reforms implemented in residential real estate over 2016-17. Not only sales improved but unsold inventory also reduced by 14%. Developers also completed 55% more units in 2018,” said Ankur Dhawan, chief investment officer, PropTiger.com.
