Housing To Provide Traction
What is the easiest way to tell how an economy is doing? By looking at its cities, and more specifically the buildings. Surely, what happened in 2019 in the real estate sector clearly captures the trends in India’s economy. In fact, the realty sector was devoid of any appreciable forward momentum in 2019. Dwindling consumption, lacklustre investment appetite and the global slowdown overshadowed all possibilities for growth as reflected in the country’s GDP growth rate that sunk to a 6-year low of 4.5 per cent in Q2 FY20.
The year 2019 also saw RERA gain firmer ground with more than 40 per cent growth in project registrations. To make under-construction projects more attractive, the government slashed GST rates to 5 per cent. The government also took a major step towards safeguarding homebuyers’ interests by banning subvention schemes. All through 2019, the RBI reduced the repo rates by a significant 135 bps and man-dated commercial banks to link home loan rates to it.
All in all, in terms of policy interventions in 2019, real estate drew considerable fire but failed to dis-play appreciable growth. Experts say the seeds sown in 2019 are expected to bear fruit in 2020.
2019 Overview
Of the total 2.61 lakh housing units sold in 2019 across the top seven cities, over 56 per cent (around 1.47 lakh units) were sold in the first half itself, finds the latest study by ANAROCK. On a half yearly comparison, residential sales in H2 2019 plummeted 22 per cent against H1 2019 while on a yearly basis there was a marginal increase of 5 per cent in 2019 compared to 2018, the report shows. On the supply front, of the total 2.37 lakh units launched in 2019, H2 saw addition of over 97,000 units as against 1.4 lakh units in the first half, thus seeing a half yearly decline of 30 per cent. However, on a yearly basis, there was a 21 per cent rise in new supply in 2019 over 2018, the study shows.
Anuj Puri, Chairman, ANAROCK Property Consultants says Commercial Office real estate flourished and remained the top real estate asset class in 2019 while the Residential Segment continued to struggle due to funding crunch and slow annual sales growth. Other asset classes like co-working, logistics and warehousing, co-living and student housing gained traction in 2019, attracting steady investments (collectively $210 mn). “The liquidity crisis did not relent and dented any ‘real’ growth during the year,” Puri adds.
The demand for ‘ready-to-move-in’ homes was quite apparent in 2019. “The greatest demand in 2019 was for ‘Affordable Housing’ as this is considered ‘within reach’ and the ‘best bet’ due to the ‘affordable’ price tag,” says Parveen Jain, CMD, Tulip Infratech & Vice Chairman, NAREDCO.
Expectations for 2020
“The pragmatic positive trends for residential sector in 2020 are Rental Housing, Affordable Housing, Group Housing and ‘ready-to-move-in’ housing,” says Jain of Tulip Infra.
Residential growth in 2020 will depend on swift implementation of previously announced sops including stressed funds (of Rs 25,000 crore), says Puri, adding, “A major part of the residential growth will most likely unfold in the second half of 2020. And the financially stronger players will stay ahead in the game.”
For 2020, Samir Jasuja, Founder and MD, PropEquity believes south India will continue to perform well due to greater demand from the IT sector. Pune, Jasuja says, will also do well generating demand from IT, manufacturing and from the retired community. “NCR will see decent traction from completed projects. We hope the Jaypee and Amarpali issues get resolved and there is at least Rs 10,000 crore disbursement from the stressed asset fund,” Jasuja adds.
Agrees JC Sharma , Vice Chairman and MD, SOBHA, a leading southern player based in Bengaluru: “With the Union Budget around the corner and the benefits of all the initiatives flowing into the economy, consolidation of the real estate sector is imminent. We believe that 2020 should be a turn-around year,” says Sharma.
Ramesh Nair, CEO & Country Head – India, JLL, says the residential market has seen a gradual shift in consumer behaviour with home-buyers now looking at mostly ready-to-move-in apartments or under-construction properties by developers with a ‘good track record’. “We believe sales will continue to rise in future and are likely to grow beyond 2016 levels.” For 2020, Nair believes the revival in the residential segment will be more visible through ‘affordable housing’ demand. “Greater demand for affordable homes will drive long-term institutional funds to invest in this segment in 2020,” Nair adds.
Anshuman Magazine, Chairman and CEO, India, South East Asia, Middle East & Africa, CBRE is positive about 2020. He says that in 2020, housing will become more affordable on the back of government initiatives and the growing needs of young families. “The real estate universe is expected to expand sizably in 2020 as new asset classes (REITs, co-living spaces, and student housing) make their presence felt,” says Magazine.
