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Indian Real Estate Ready for Bigger Strides Clearing of The Recent Hurdles

Jul 26, 2018 | India

It can be a bit difficult to get a complete picture of the real estate market in India considering the latest reformations it had gone under in the recent days. To understand properly, sort of a bird’s eye view may help you out, or on a second thought, may be few insights from experts and observers can get you sorted.

However, coming over with the cross currents prompted by the changes, the market seems to be rerouting to normality and stability swiftly. Currently the market lacks stimulus to escalate the main stream demand. But the recent reformations, attaining commendable transparency and consolidation, are definitely going to generate a momentum in the inflow of foreign capital.

Shrinking gradually through the last decade, the residential sector in the end of 2017 has been reduced to a fraction of its previous volume. Only 100000 new units entered the market in eight prominent cities including metro cities and a few promising 2-tier cities. Also the sales volume remained within 228000 units, which is again only a fragment of its previous records. The market have been witnessing a slow but steady decline in the last few years but the last year, to be specific, has been like an acid test for the sector.

Economic measures like demonetization had created a brief standstill in many sectors including real estates in India. But with current trends, it can be said that stakeholders are gradually growing confidence on reform measures like Regulation and Development Act in 2016.

The latest of the reforms was introduction of Goods and Service Tax, which yet could have been a stalling agent, did not proved to be so. Few markets, where RERA has developed, saw rise in sales as developers offered units in revised and reduced prices. Though it is an unprecedented trend in Indian realty, the prices went a down with the change in developers’ outlook following the reforms.

The new paradigm has provided ample scope for growth to new sectors. For example, sectors like warehousing, manufacturing and logistics has grown in good proportion adapting to the new norms. The new single tax regime has catalyzed a merger of logistics into infrastructure sect, which of course has opened up huge opportunities for logistics as a sector.

Indian Real Estate

The sheer convenience of picking up capital on longer terms is expected to boost growth to newer heights. Around 4 dozens of economic corridors and two dozen multimodal logistic parks are under planning already. These facilities are connected to national highways. It can be assured that these facilities are going to be first ever freight aggregation hub with end to end warehouse, cold storage etc. Added to that, huge investments are also flowing in. For example, a leading organization has come up with a five year commitment of 100 billion rupees.

The potential of this sector can be realized even better in other asset classes in real estate. The office leasing markets have maintained steady fundamentals. But the struggle concerning its expansion is yet imminent.

By 2020, the warehousing space is expected to reach 839 million square feet with a yearly growth rate of 8 per cent. This expansion is mostly fueled by growing manufacturing and e commerce sect. Government assertive role in housing and measures to mitigate risks through structural reformations is generating confidence in consumers and market stakeholders like institutional funds.

A fare share of these stakeholders has managed to sieve in funds to real estate with a change in their fund allocation strategies. Funds are being pulled into existing assets and under construction projects from pension and private equity funds.

A trend to invest after overseas residential ventures can be noticed to. Unlike earlier times, these investments are not made just to have residence; these are carefully done investments contributing to the larger practice of capital investment.

Joining Moody’s and Standard Poor’s, a Fitch’s rating too has kept India on top of the list for countries with most potential.

India is looking at a 7.3 per cent growth in the coming year and an average of 7.5 per cent growth in the coming two years, according to the ‘Global economic prospect Report June 2018’ by World Bank. The present trends hint that the nation is on the way to become the fastest growing economies of the world. So far the real estate sector is concerned; the overall revival will be depending totally upon the benefits attained with the recent economic reformations.

Source: “India’s property market has finally cleared the speed bumps” by Shishir Baijal, Gulf News, June 28, 2018


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