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In 2018 Residential real estate might see a higher sales

Posted by Alok Upadhayay on January 2, 2018
| 0

The year 2017 has been an eventful year for the Indian economy at large, and the real estate sector got more than its usual share of the limelight. A series of reforms and structural changes tore into the heart of the industry, effecting an attack on market opacity, unaccounted funds transactions and customer victimisation.

The entire real estate fraternity had to re-orient their businesses to sustain in the changing environment. Already, the real estate sector has shed a massive part of its unorganised and fragmented nature, and the ways and means of doing business in changed for good in 2017.

The government maintained a laser focus on changing the fabric of the Indian economy, with direct implications on the real estate sector, by implementing impactful reforms:

# Cracking down on black money transactions with demonetisation

# Setting up Real Estate Regulatory Authority (RERA) to increase financial discipline, improve transparency and empower property buyers

# Implementing the goods and services tax (GST) to boost transparency in taxes and improve business efficiency

# Curbing anonymous property transactions and ownership by incisive amendments to the Benami Properties Act

Simultaneously, the government’s ambitious ‘Housing for All by 2022’ mission also received a massive thrust in 2017 with the granting of the infrastructure status to affordable housing. In addition, the definition of affordable housing and houses classified under middle income group (MIG) underwent a series of tweaks to cover a larger buyer base and help developers offload their budget homes inventory.

Overall, 2017 saw the government making it clear that homebuyers will no longer be at the mercy of real estate developers, and putting various measures in place to ensure that housing supply syncs up with demand and pertinent projects are developed. There are doubtlessly some teething troubles — some of them very obvious — in implementing and executing the new policies and reforms. However, they have made a deep impact even now.

Reputed global agencies have recognised the government’s efforts in 2017 — India featured in the top 100 nations in terms of ease of doing business according to the World Bank, and Moody’s elevated India’s sovereign rating from the lowest investment grade of Baa3 to Baa2, also upgrading its outlook from ‘stable’ to ‘positive’.

Residential: Supply-demand dynamics

In 2017, new housing project launches were severely impacted by demonetisation, RERA and GST. According to a report, only 94,000 units were added in top seven cities of India between Q1-Q3 2017, a drop of more than 50 per cent as compared with the corresponding period in 2016.

However, the last quarter of 2017 looks encouraging. Months into this quarter, around 18,000 units were launched, which is about 90 per cent of the new launches in Q3 2017. With restricted new launches and fence-sitters returning gradually to the market because of the comfort that the structural reforms and enhanced transparency provide them with, 1,60,000 units were sold during Q1-Q3 2017. The decline in sales was only to the tune of 30 per cent compared to Q1-Q3 2016. Unit sales have exceeded new launches for the consecutive six quarters, and the trend continues in Q4 2017 as well.

Price trends

2017 remained a buyer’s market throughout. The presence of a significant inventory of unsold units kept a tight control on average prices, which largely remained range-bound between Q3 2016 and Q3 2017. Assessment of average prices for the past five years (Q3 2012 to Q3 2017) reveals that Pune, Kolkata, Hyderabad and Bengaluru were the front-runners in capital value appreciation, bucking the trends of larger cities such as Mumbai Metropolitan Region (MMR) and National Capital Region (NCR).

Unsold units trends

Unsold units in top seven cities declined by 8 percent between Q3 2016 and Q3 2017. This decline was primarily due to restricted new launches amid the green shoots of sales recovery. The cities in South India recorded a higher decline in unsold inventory as compared to the other cities, primarily due to strict control on new launches and the dominance of end-users in these cities.

Unsold inventory decreased by 22 percent, 18 percent, and 16 percent in Hyderabad, Chennai and Bengaluru, respectively, between Q3 2016 and Q3 2017.

NCR and MMR, which account for around 55 per cent of total unsold units across top 7 cities as of Q3 2017, witnessed a mere 6 percent decline in unsold units between Q3 2016 and Q3 2017.

In the post-RERA era, developers are focusing firmly on executing under-construction projects within the stipulated timelines; new launches are likely to be restricted, and unsold units will decline further in 2018.

Unit size trends

With changing buyer preferences and skyrocketing prices, developers have been compelled to construct compact homes. As per research, the average size of new units launched in 2017 has shrunk significantly over the previous year, across the top 7 cities of India. Notably, NCR witnessed the highest reduction of 21 percent, followed by 15 percent reduction in Pune, Kolkata and Hyderabad, and 12 percent in MMR.

Wrapping up

Real estate developers are unlikely to forget 2017, which was like a bad dream come true, and look forward to better business in 2018. For sure, homebuyer confidence is reviving, and more fence-sitters will spring into action in 2018.

n Overall, 2018 will be a year of market recovery defined by restricted new launches, gradually improving sales and declining unsold units

n With a massive focus now on affordable housing, this segment will be the poster boy of 2018

n A notable phenomenon in 2018 will be a large-scale consolidation of developers and brokers, and distressed assets changing hands.
We might not see a scintillating residential market recovery in 2018, but it is certain that whatever recovery and growth we see from here onward will be sustainable and backed by stronger market fundamentals than ever before. The days of speculative peaks and troughs are safely behind us.

Written By – Anuj Puri, (Chairman, ANAROCK Property Consultants), published in Indian Express
Source: http://indianexpress.com/article/business/business-others/residential-property-with-reviving-homebuyer-confidence-2018-might-see-higher-sales-rera-4984915/

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