2017, was indeed, an enthralling year for the Indian realty sector. “While demonetization and Goods and Service Tax (GST) stalled the growth of residential real estate sector across the country, regions like Hyderabad, National Capital Region (NCR) etc., mostly got affected,” says a property analyst from Modi Builders. Also, there were numerous developers who couldn’t complete projects, fading the buyer’s trust in them.
However, 2018, experts anticipate, to be different, at least in the Southern region. The implementation of Real Estate Regulation and Development Act (RERA), which makes it compulsory for developers to list a property with the regulatory authority before promoting it, has revived the buyer’s confidence. The small-time builders will be majorly impacted in the unorganized sector. Whereas, the established developers are expected to expand market share, as the small quit the market.
There are data points to underline these trends. A leading property listing portal recently conducted a survey among 200 developers, across metro cities to list down their expectations. The reports indicate a resurgence of the market over the year.
The majority of developers believed that Bangalore, Pune and Hyderabad will be the top three cities where residential property sales would grow rapidly. However, the remaining felt that Mumbai, Delhi NCR, Kolkata and Chennai will be amongst the top cities to mark growth.
“Where prices are concerned, Hyderabad is expected to flourish the fastest; 20 per cent of developers expected projects in the city to appreciate on the basis of cost per sq ft, followed by Bangalore and Pune,” highlights Modi Builders Reviews.
The survey highlighted that Top Builders in Hyderabad are planning to launch new projects in the coming months. Likewise, Pune and Hyderabad have witnessed a positive growth with 75 per cent builders stating their aim. On the other hand, there is a decline in the new launches from developers in Delhi NCR and Mumbai.
The Modi Builders report suggests that affordable housing could pan out as a trend in 2018. It also pointed out that more and more developers were planning affordable housing projects, and a very few still preferred the mid-segment.
Nearly 80 per cent of the builders stated that RERA will bring in the much-needed transparency in realty dealings; 20 per cent were the doubtful. It might create another level of officialdom, they felt. The rule, though, is good news for real estate investors. Industry experts believe that RERA could foster a major increase in Foreign Direct Investments (FDI) because of transparency and organizational set-up.
A developer-dominated market is slowly becoming a buyer-dominated market as the new regulations have empowered the buyers with several rights. The factors like transparent transactions, binding timelines, and risk-free approach to secure financial interests of the buyers will guarantee a fair play. The homebuyer, who was struggling to stumble on a fair deal due to uncertainties on deliveries and no rescue available against builders, has gained assurance, thanks to the policies implemented by the Modi government.
Realty developers, however, stood divided on the impact of these policies, such as GST, RERA, demonetization etc. Some believed that GST has complicated their business operations, while some said they weren’t sure as to what the tax reforms would bring in the long run.
“In a year which saw several policy changes, the fact that there were over 16 lakh active searches for a property last year, discredits the myth that buyers have exited the market. Real estate sector continues to be an advantageous asset for Indians,” said the Modi Builders Marketing Head.
In addition, the PM’s ambitious plan of building homes for all by 2022 will stimulate economic revolution worth $1.3 trillion, which is greater than Mexico’s GDP, constructing 60 million new houses and over 2 million jobs annually. With almost every project being registered under the PMAY scheme, the urban realty sector is attracting new-age buyers with well-appointed homes at affordable prices. The year 2018 will be no exception to this trend.
In response to PM’s Vision of ‘Housing for All’, the developers have come forward with multiple ‘affordable housing’ options. From a ticket size of Rs 10 lakhs to Rs 50 lakhs, many affordable housing projects are becoming popular among the buyers in tier I and II cities. Many real estate funds are also pumping money to support developers and the momentum is expected to pick up in 2018.
“As transparency prevails in the market, we anticipate the return of the high-value investor in the real estate market. We also see a revival of interest in luxury properties. Overall, these are positive signs for long term salubrity of the industry,” the Marketing Head said.
GST applicable to the purchase of homes in under-construction projects caused home buyers to either buy into completed projects or latch on to their purchase decisions. Also, developers shelved sales in projects not registered under RERA across major cities. These combined factors led a quarterly sales decline in five of the top eight cities to an unprecedented low of 4.7 per cent in third quarter of 2017.
In 2017, capital values in cities such as Hyderabad surged at a relatively faster rate, due to their lower price base compared to the Tier 1 cities. Prices will remain stable in 2018 too.
The residential asset class involved a large share of investments in the country last year. Implementation of revolutionary reforms will make Indian residential property segment more transparent. Stable investments will persist in this asset class in 2018.
In the year 2018, developers will majorly focus on selling and completing the existing projects within the deadline. Hence, the year 2018 will witness major sales and delivery in the residential market. RERA has given opportunities to developers to stay transparent and complete the project by the mentioned deadline.
With the increasing prospects of FDI and revolutionary government schemes, the Indian real estate sector is set to revive in 2018. Though there will be a balanced mix of both challenges and opportunities for developers and home buyers, they will need to work out for positive long-term effect.