2018 Rear View Mirror: 2019 Has Strong Growth in Cards For Real Estate
Trends that shaped the real estate industry in 2018 and what's in store for 2019
According to a joint report by CREDAI and JLL, India's real estate sector is projected to reach $180 billion by 2020 from $126 billion in 2015. As the growth trajectory looks strong, let’s take a look at how 2018 ushered the massive structural changes in, and what 2019 looks like for Indian real estate.
2018: The Year of Change
The year witnessed a remarkable journey for the economy and real estate industry made a strong comeback in the second half of the year.
The industry underwent numerous ups and downs, battling an initial slowdown due to demonetisation and rising up again with the introduction a series of restructuring policies such as the iconic RERA act and GST in real estate that restored trust, accountability, and transparency in the system.
The government of India also brought in numerous initiatives to boost a limping real estate business. The announcement of Credit Linked Subsidy Scheme (CLSS) in 2018 proved beneficial to both buyers and sellers because this considerably made loans very affordable. This scheme ensures that the interest subsidy is credited upfront to the loan account of receivers via lending entities resulting in reduced effective housing loan and equated monthly portions. In addition, the Pradhan Mantri Awaas Yojana (PMAY) initiative also offers interest subsidy schemes to boost affordable housing segment. Coupled with RERA and GST, this also supported the industry gather more demand for housing.
However, on the ‘ease of dealing with construction permits’ category in the World Bank business rankings of 2018, India’s jump was almost negligible – from 185 to 181. As the business in itself is not experiencing adequate sales to hike the GDP of the country, the current scenario of taxing the unsold inventory with developers further leads to confusion and doubts in the mind of the home buyers. It results in the delay of the purchase decision, creating an unfavourable and unhealthy trend in the economy.
2019: The Year of Opportunity
Heightened demand for housing
2019 is the year of reaping benefits for the investments made in 2018. According to reports, the housing demand could rise by about 10 million per annum. The reasons for this increased demand are manifold. The affordable housing schemes (PMAY) from the government are giving real estate demand a massive boost. Developers with access to low cost funds and buyers with potential to get low interest housing loans are expected to go in to overdrive in the coming year. The depreciating rupee is also attracting NRI investors to see a long-term return horizon.
Rise of commercial market demand
The introduction of REITs (Real Estate Investment Trusts), the popular culture of co-working spaces, and improvement in industrialization and trade opportunities is fuelling the demand for commercial properties and hybrid spaces in cities. Added to this is the rising demand from the tourism industry that’s now catering to hospitality business models like Airbnb.
Stricter regulations are pushing for consolidation in the industry. In 2019, we may see more acquisitions and joint ventures that promise enhanced capabilities with the coming together of strong entities..
Increased transparency and greater confidence in the sellers added to the promise of higher returns has attracted NRI interest and paved the way for increasing FDI investments in the Indian real estate sector.
The Indian real estate industry has always transformed in accordance with the changing dynamics of the market. A year of various milestones, 2018 has revamped the industry quite a bit. Here, 2019 will be the year to see this business booming with demand, placing India on the global map as an ideal investment destination.
Arvind Kadam has nearly two decades of experience working across industries ranging from real estate, retail, investment banking and engineering and juggled roles such as corporate planning, quantitative research and sales. His experience in working across geographies and multi-locational teams in Europe, Middle East, the US and Hong Kong has equipped him with an excellent sense of human behaviour and he is usually known as a great motivator.
With a deep understanding of real estate, finance and technology, he aims at disrupting the home buying process by leveraging the latest innovations and change the perception of the industry. An entrepreneur by mindset, Arvind has worked closely in Indian real estate looking after fundraising, project marketing and advisory. He has worked with HCL Technologies and Infosys before the entrepreneurial bug bit him.
Arvind is an engineering graduate from the University of Delhi and an IIM Bangalore alumnus. You would find him reading non-fiction during his leisure.