The year 2019 proved to be a mixed bag for the nation’s real estate sector. While commercial real estate flourished, that was not the case with residential real estate, although the Modi government took many initiatives to give it a big boost.
Industry experts say that developers, real estate players, consumers and investors have been facing the burden of dip in the housing segment for the last few years. From unsold inventories to incomplete construction to delayed projects, the segment had met a lot of challenges which have been leading to negative sentiments. Unproductive assets in the form of under-construction, stuck or delayed projects are estimated at 560,000 homes worth Rs 4.5 trillion ($65 billion) across the top seven Indian cities as per recent reports.
However, “some positivity is seen in the market now as a result of various announcements made by the government this year. Government announcements like NHB raising liquidity to housing finance companies, relaxation of ECB funds, and approval of a Rs 25,000-crore fund have all been made in positive stride. Covering 1,600 projects with 458,000 dwelling units under the announcement will help in boosting buyer confidence and is also likely to generate considerable employment,” says Honey Katiyal, Founder, Investors Clinic.
Dhruv Agarwala, Group CEO, Elara Technologies, also says that to say that there were no positives would be unjustified. “The industry saw a growth in demand for affordable housing and higher sales bookings by builders with good track records. The co-living segment for students and young working professionals gained a lot of momentum. This segment can only grow more as consumer preferences get better understood and business models evolve.”
Moreover, commercial real estate performed exceedingly well and leasing of office space is likely to end the year at record levels. India got its first REIT with more in the pipeline. “This will transform the industry with the unlocking of massive amounts of capital. The co- working segment also witnessed growth, despite the WeWork fiasco, as demand for flexible and short term office space is on the rise,” adds Agarwala.
One, however, needs to note that the measures are not yet adequate in size and will not be able to cater to real estate developers and players in Tier 2 and 3 cities. These measures also cannot serve the smaller developers in the industry. More importantly, the measures need to be backed by other factors to bring in a proper resolution to the unproductive assets.
India needs a consistent growth both in economy as well as employment, and development in the real estate sector can propel the growth in both these parameters. Urgent action in terms of implementation of various schemes and processes is required to bring momentum into the sector in 2020.
“Real estate will hopefully witness a growth story in 2020. We expect the challenges in the real estate sector to get solved. We expect the government to lend full support to the sector not just in terms of announcement but also implementation. 2020 needs a mechanism to protect developers from the existing liabilities and stuck projects. It also needs to incentivize stress projects through various ways,” says Katiyal.
Whatever be the case, property developers are quite bullish on the growth prospects of real estate and are hopeful that the sector will most likely do well in the coming year.
Developers say that from an industry perspective, the year 2019 turned out to be a challenging one. Despite various measures announced by the government as well as the RBI, the going was tough for the industry.
“The sluggish economic growth during the first two quarters of the current fiscal added to the misery of the sector. As a result, both sales as well as launches fell during the year. However, 2020 may be a different year. The impact of some of the measures is likely to bear fruit in the next couple of months. Accordingly, we expect 2020 to be better. There is also an expectation that the government may cut personal income tax as well. If materialised, this will certainly boost the economy as well as real estate sector,” says Manoj Gaur, MD, Gaurs Group, and Chairman, Affordable Housing Committee, CREDAI.
Deepak Kapoor, Director, Gulshan Homz, says, “2019 was a hectic year for the sector with so much happening almost every month. The government was seen concerned and willing to help, but all these measures are likely to have effect in the coming year. All the segments of real estate — from commercial to residential — saw a healthy movement, but the pace was not the way it should have been. Multiple policy measures were announced, but something was left wanting and it is this gap that has be plugged in in the new year. We hope that 2020 would be much fruitful in terms of funding for real estate and finance options for buyers.”
Yash Miglani, Managing Director, Migsun Group, says, “The year 2019 was a tough one for the real estate sector, but affordable housing did reasonably well. Most of our project offerings are in affordable category and we received encouraging response of the customers, especially in the second half of the year. With the government announcing several measures in the last couple of months, we expect the revival of the sector is round the corner and affordable housing will play a key role in this.”
Pradeep Aggarwal, Founder & Chairman, Signature Global and Chairman, ASSOCHAM National Council on Real Estate, Housing and Urban Development, says, “2019 was a good year for the real estate sector, but anything substantial did not happen. A lot of announcements were made and we hope that in the coming year at least some of them will come to fruition. In the affordable segment, we expect the government to seriously look into the issue of raw material cost and land prices.”