These #3 Real Estate Experts Predict the Industry Trends for 2018
2018 to be a year of market recovery defined by restricted new launches, gradually improving sales and declining unsold units
2017 was an action-packed year for the Indian economy, and the real estate sector received a lot of attention. A slew of reform measures were taken for the industry, resulting in a surgical strike at market opacity, unaccounted funds transactions and customer victimization.
The entire industry had to re-design their businesses to keep up with the changing situation. Already, the real estate sector has shed a massive part of its unorganized and fragmented nature, and the ways and means of doing business changed for good in 2017.
The Central Government maintained focus on changing the framework of the Indian economy, with direct implications on the real estate industry, by putting into action highly impactful reforms:
- Cracking down on black money transactions with demonetization
- Setting up RERA - A regulator to increase financial discipline, improve transparency and empower property buyers
- Introducing GST to boost transparency in taxes and improve business efficiency
- Curbing anonymous property transactions and ownership by incisive amendments to the Benami Properties Act
The Government’s ambitious ‘Housing for All by 2022’ mission also became the driving force in 2017 with the granting of the ‘very vital’ infrastructure status to affordable housing. Overall, in 2017, the Government made it clear that home buyers will no longer be at the mercy of real estate developers and putting various measures in place ensured that housing supply syncs up with demand and pertinent projects are developed.
As an investor, it is time to revise the strategy
Tanushree Nandan, Partner, Red Ant Realty, an affordable housing developing company, and co-founder, The Layman’s Lawyer, an online legal services provider, feels in the past, developers would launch a project, sell the under-construction flats, and use the proceeds to complete the construction. This, she says, benefitted both the customer (in that they could personalize the flat) and the developer. It also was profitable for an investor, as he was able to buy the flat at a low rate, and sell it once completed at a much better rate.
However, this model doesn't seem a good deal any longer, as investing in an under-construction flat now attracts heavy GST.
As an investor, it is, therefore, the opportune time to revise the strategy. “Since the requirement in effect is that a developer must start a project with enough money to complete the entire project without raising funds through sales, one option for investors with deep pockets could be to partner with developers to fund the construction in return for a share of the profits,” suggested Nandan.
“Alternatively, for investors with the not-so-deep pockets, an old strategy of buying a ready flat in an upcoming location, holding on to it for a few years and then reselling it once the neighbourhood has developed, may be adopted,” she concluded.
Most of the real estate stakeholders need to go back to the classroom
Significant transformations of 2017 along with increased transparency and accountability measures have made a number of real estate companies alter their business models to keep pace with the evolving regulatory regime. According to Shubika Bilkha, Business Head at the Real Estate Management Institute (REMI), technologies and development processes, on-site and off-site, needed to deliver quality at a significant scale have left even the old hands at construction a step behind.
“Implementing the new Act across the various departments of a real estate business, increased consumer activism and driving their business towards customer centricity has a number of Senior Managers/the C-Suite in a knot. All of this coupled with a tepid sales environment, new norms that require effective management of project cash-flows and a need to attract external finance, now require even the top hands to build additional skill sets,” she opined.
2017 marked the growth revival of the online search traffic
Sunil Mishra, Group Chief Strategy Officer, Housing.com, PropTiger.com and Makaan, says, 2017 marked the growth revival of the online search traffic after witnessing some slowing growth in 2016. Conversion of this traffic into final sales is still low as most of the buyers are end-users and are exploring more ready-to-move-in apartments.
“We also saw a surge in search on rentals and resale properties. Since launches of new apartments were very low in the last 9 months following implementation of RERA. This, Mishra predicts, could keep sales subdued in first two-quarters of CY2018, offset to some extent by an increase in affordable homes.
“CY2018 second half should see growth reviving both in terms of demand and supply of new homes, while rentals and resale should continue growing spurred by new jobs arising out of economic reforms, which have started showing some results now,” enthused Mishra.
Notable phenomenon in 2018 will be a large-scale consolidation
Real estate developers are unlikely to forget 2017, which was like a bad dream come true, and will look forward to better business in 2018. For sure, home buyer confidence is reviving, and more fence-sitters will spring into action in 2018.
Overall, 2018 will be a year of market recovery defined by restricted new launches, gradually improving sales and declining unsold units. With a massive focus now on affordable housing, this segment will be the poster boy of 2018.
A notable phenomenon in 2018 will be a large-scale consolidation of developers and brokers, and distressed assets changing hands. We may 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.