Housing sales jumped by nearly 8% in the first 3 quarters of 2018
NBFC crisis hijacks Indian real estate’s growth story, fallout into 2019
General elections will play a role in the sector’s fate in 2019
As we embark on the final lap of this calendar year, it is appropriate to take a quick glimpse of what has happened in the Indian real estate sector during a highly tumultuous 2018.
Given the RBI’s alternating cautious and proactive stance towards managing the overall economy, it remains to be seen if 2018 will bring any further surprises for the real estate sector. If not, we can expect fairly steady sailing until the end of the year.
2018 So Far
Residential Real Estate
The year 2018 brought with it a new ray of hope for the residential sector, with both sales and new supply gradually picking up across the top 7 Indian cities – Bengaluru, National Capital Region (NCR),
MMR, Pune, Bengaluru & Chennai accounted for 76% of the new supply
MMR saw max. jump in buys with 16% increase, NCR & Hyderabad lowest with 2% increase
Overall unsold housing inventory reduced by 2%
As anticipated, the real estate market across the top 7 cities in Q3 2018 stayed subdued. The quarter saw a meagre 3% increase in the overall fresh housing supply as against the preceding quarter.
These new launches were largely dominated by the lower-budget segment (< Rs. 40 lakh) with nearly 42% of the total new supply. 33% launches were in the mid segment (Rs. 40-80 lakh) and the remaining 25% in the luxury and ultra-luxury segments.
The third quarter of the year is usually a lull period due to the 15-day shraddh period, which is considered inauspicious for buying property. Consequently, builders keep new projects on hold for the ensuing festive season beginning early October.
In terms of purchases, there was a slight increase of 9% during the Q3 as compared to Q2 2018 across the top 7 cities of India.
Technology has disrupted almost every facet of the real estate business today. However, the creation of the core product is and will remain the most important aspect of this business, and advanced technologies are certainly playing a major role there.
By adopting innovative technologies like automation in construction, innovative designs, sustainability, use of prefabricated material and online marketing, developers can value-engineer their product.
Let’s look at some of the existing and upcoming technology disruptions in real estate construction.
Among the many new technologies already adopted by the construction sector, 3D Printing (large-scale printing of homes) is anticipated to change the way real estate is built over the next decade.
Though still very nascent, 3D Printing can potentially replace a substantial amount of construction across major segments, including residential, commercial or even retail.
This will be a massive paradigm shift in real estate development. Apart from seriously reducing waste, cost and labour requirements, 3D printing will help builders penetrate the hitherto inaccessible areas of dense urban centres,
There’s a popular saying in India – Athithi Devo Bhava –meaning the guest is God. Backed by this popular belief and the rising business prospects due to the significant growth of the Indian travel industry, homestays have today become a viable option for both travellers and its owners alike.
For the guest, it’s a home away from home that is nicely tucked into the greens or high up in the hills, in the remotest hinterlands. For the property owner, it’s a lucrative income source.
Numbers suggest that India’s travel market is projected to grow at an annual rate of 11-11.5% and will be worth $48 bn by 2020. Homestays are indisputably one of the means to cater to this growing demand. Rising disposable incomes, focused government measures to boost the travel industry and the growing appetite for travel is accelerating this growth.
In fact, India saw a 15.6% annual increase in foreign tourist arrivals in CY 2017 as against the previous year. Business tourism too is expected to grow three-fold by 2030 from $30 bn in 2015.
The ancient Chinese curse ‘may you live in interesting times’ certainly has a lot of pertinence to Indian real estate today. These are doubtlessly ‘interesting’ times for the sector, which has transformed significantly over the last decade.
The pace of transformation has been accelerated further by the Central Government’s reformative steps aimed at ushering in ‘Acche Din’ to the realty sector.
Whether or not that has happened to the expected extent is debatable – but certainly, a new regulatory environment is being created with the implementation of several disruptive policies.
Hyderabad’s residential demand has witnessed a significant increase due to rising employment opportunities and positive market outlook, which were just marginally affected by policy changes including DeMo, RERA and GST.
ANAROCK Property Consultants’ report ‘Hyderabad: The Bright Spot in Indian Real Estate’ analyzes the city’s major real estate trends and highlights that the city has emerged as one of the most sought-after residential destinations in the country.
The city is experiencing a phenomenal spurt in residential real estate activity with appreciating capital values and increase in retail and office space absorption from 2014 to 2018.
Policy support from local government to strengthen the socio-economic indicators has largely attracted investments post-2014.
Absorption in Hyderabad increased by 21% in 2017 as against the previous year due to positive market sentiments coupled with growing IT workforce mainly in the western zone. The absorption in Q1 2018 is at par with the new supply being pumped into the market.
The unsold inventory in the city has been declining gradually since 2017.
Technology is disrupting different industries across the world, and real estate cannot be far behind.
Already, real estate consultants have moved beyond the traditional ways of prospecting, with the Internet opening up the market in unprecedented ways and taking a lot of the footwork out of finding property options.
As much as 70% of modern real estate consultancies’ prospects are today acquired through digitally-obtained leads.
As big data and analytics become more integrated with the property brokerage industry, such consultancies are now ‘cracking the code’ by in many innovative ways, including:
Obtaining and feeding deal and bid information into their company’s central repository at the tap of a few buttons
Instantly matching customers’ requirements with the available options
Tracking data on projects’ construction progress and regulatory compliances in real time as and sales figures information
If we look at the larger picture of technology use in the real estate business, various new avenues and means of doing business are going to open up. Let us, for example, take crowdfunding.
Crowdfunding in Real Estate
Crowdfunding could emerge as a new way for real estate consultancies to add value both to developers and their customers.
Highly-delayed units in MMR and NCR are worth a whopping ₹3,60,000 crore
Hyderabad has least project delays with around 8,900 units worth ₹5,500 crores delayed
Dilutions in RERA make it ineffective in some states
Incessant project delays, dodgy activities of some developers and land litigation issues have plagued the Indian real estate sector over the last several decades, not helping its domestic and international image.
Realizing the significance of real estate on the economy of the country, the Government has, over the last few years, been taking active measures to bring in greater transparency and efficiency.
However, despite the implementation of game-changing policies like RERA and GST, the issue of stalled or delayed projects that has primarily been at the core of buyers’ discontent is yet to be addressed satisfactorily.
If we add up the numbers for the top 7 cities, it emerges that the residential real estate launched in or before 2013 that is stuck in various stages of (non) completion is collectively worth a whopping ₹4,64,300 crore for a total of 5,75,900 units that are yet to be delivered to their respective homebuyers.
Among the top 7 cities, MMR saw most new launches – nearly 13,600 units & highest sales at 15,200 units in Q2 2018
17,220 promoters and 15,550 agents under MahaRERA – highest RERA registration Pan India
Stamp duty increase may be a slight dampener in the short-term
On the back of critical policy reforms like DeMo, RERA and GST, 2018 is seeing both sales and new supply picking up across cities. Interestingly, the Mumbai Metropolitan Region (MMR) leads this trend.
ANAROCK data indicates that out of the total new housing supply of around 50,100 units in Q2 2018 across the top 7 cities, MMR saw the highest number of new launches with nearly 13,600 new units – a 59% increase against the preceding quarter.
In terms of sales too, MMR clocked the maximum housing sales with approximately 15,200 units being sold in Q2 2018 – an increase of 26% against Q1 2018.
MMR’s top 3 micro markets across budget ranges 2017 – Q2 2018: