Affordable Homes To Drive Demand: Anshuman Magazine, Chairman, India & South East Asia, CBRE India

Anshuman Magazine, Chairman, India & South East Asia, CBRE India, talks to Ashish Sinha about how and why the consumer demand will pick up in 2018 leading to recovery in the residential market. Edited excerpts:

How do you sum up 2017 for the residential market?

Demonetisation had a big impact initially. Overall, the market did slowdown compared to the previous year, but it also showed signs of improvement. Of course, the new launches reduced in 2017, and so did the sales. And as it happens everywhere in the world, if new launches are reduced, it puts pressure on supply. So while the demand slowed down, so did the supply. However, since the economy is growing and more people are getting jobs, there will be demand for houses at least from end-users. And any increase in demand, particularly for affordable housing, will lead to developers addressing that segment.

Which means 2018 will be a better year for the industry?

Of course. I expect 2018 to be better than 2017, and I will explain how. Developers offer products where there is demand. I expect the demand for affordable houses will drive the residential market. By affordable, I do not mean the government definition of affordable housing, but affordable for end-users of that market, not low-cost housing. Affordable and low-cost housing are two different things. What is affordable in Hyderabad, is low-cost in Mumbai and vice-versa. I predict that the demand for affordable houses will pick up in markets such as Jaipur, Delhi, Mumbai, Bangalore, Kolkata, Hyderabad and Pune. In 2018, the sales volume will steadily pick up in the affordable sector. Another important trigger will be the positives of the Real Estate Regulation Act or RERA. In 2018, as more and more launches happen under RERA, consumers will be confident of buying houses. I think RERA is the trigger that will bring back the consumers and buyers for real estate because it gives them confidence that you will get delivery. RERA will also bring in funding from institutions — both foreign and Indian. I expect the positive impact of RERA to start showing from 2018. It may not show as early as in January, but by middle of the year for sure.

Is your initiative CBRE Home Utsav also contributing to the recovery?

Yes, the feedback has been positive. We have tied-up with 70-80 developers and lined up ready inventory; and we are getting good response from consumers. CBRE Home Utsav is an online home fest that brings all the leading developers of the country on a single platform showcasing exclusive, affordable as well as luxurious homes across the country. It endeavours to bridge the existing gap between developers and buyers through its pan-India online revolution, promising a truly unique experience for both.

How do you explain the growth of realty consultancy business when the overall real estate market in India has been sluggish over the years?

We are in the services industry and India’s growth has been (strong) in the industry. Indeed, the residential market has been slow and sluggish, but the commercial market has been doing well. The total absorption for office space in India in 2015 was about 43 million sq. ft. In 2016, around 38 million sq. ft. was taken up, and this year, till end-of-year, we will hopefully do over 40 million sq. ft. Effectively, if you look at the last three years, overall 120+ million sq. ft. of office space was absorbed. Not only in the Asia-Pacific region, but globally too these numbers are unparalleled. And that is helping the services business thrive.

Will the dream-run of commercial real estate business continue or decline in 2018?

You are right. Already, the last three years have been fantastic for the office/commercial business. So how long can this sustain? The good part is, unlike 10-15 years ago when nothing much was happening, today the market dynamics are different. I think because of the scale and the size of the market, there is some momentum. People are either consolidating or expanding or relocating. This keeps the office/commercial market going. Plus, a large part of the demand in office space is still coming from offshore business processing units. India is an established destination. Yes, there are concerns: our wages are rising, there’s competition from countries such as Philippines, parts of Africa and parts of Eastern Europe that we are competing with. But we have the advantage of scale. We are a well-established global destination for offshoring. So, larger international companies have confidence in continuing offshoring work here. This will sustain the market to some extent. The second good part of the story is that the non IT/ITeS companies are starting to expand. Be it the financial services, pharmaceuticals companies, e-commerce to some extent, manufacturing, or the office side of the manufacturing industry, there is expansion. Therefore, the office market will sustain the growth momentum in 2018 too. Then we do expect logistics industry to pick up in a big way next year. Retail has been doing all right, but not booming. This may change too with more foreign brands coming to India.

What are the revenue-generating segments for CBRE India?

In terms of revenue, the transaction business is the biggest contributor with over 40 per cent share, followed by the facility management and the construction management businesses. We can’t give specific numbers, but the fact is, we have been consistently growing since the last 17 years. The growth has been due to starting new services that are all synergetic to what we do.  

Ashish Sinha

BW Reporters Ashish Sinha is an experienced business journalist who has covered FMCG, auto, infrastructure, tourism, telecom among several other beats. Ashish has keen interest in the regulatory scenario impacting different sectors. He writes on aviation, railways, post and telegraph, infrastructure, defence, media & entertainment, among a wide variety of other subjects.