Impact of regulatory mechanisms such as RERA and GST were felt all along 2018 with all stakeholders — real estate developers, home buyers and real estate brokers — finally accepting the new market realities. Transparency and accountability became the ‘new normal’ this year but towards the end, the NBFC liquidity crisis precipitated by IL&FS default played spoiled sport and threatened to negate the gains made during the year.
While launch activity recouped from last year, they were still much lower than the high levels seen in 2014 as developers focus on completing existing projects, while complying with RERA rules. Developers increased their focus on the affordable segment supported by government incentives. Ready-to-move-in properties garnered maximum buyer interest.
Prices: Average property prices remained largely static across the top seven cities in 2018. In fact, average property prices at the pan-India level saw only 1 percent increase in 2018 as against the previous year, from Rs 5,491 per sq ft in 2017 to Rs 5,545 per sq ft in 2018, as per data by ANAROCK research.
Litigations: Even though sales and new supply picked up QoQ across the top cities, the issue of stalled projects showed few signs of resolution in 2018. 2018 was a year where consumers, previously held hostage by lack of efficient regulation, finally felt that they are being heard and represented.
Launches: While launch activity has recouped from last year, it was still lower than the high levels seen in 2014 as developers focus on completing existing projects, while complying with RERA rules. Mid segment accounted for 45 percent of the total launches, with the affordable segment close on its heels with a 42 percent share.
Developers increased their focus on the affordable segment aided by government incentives. Affordable housing, backed by a series of government sops during 2018, kept the residential supply momentum ticking. In sharp contrast to earlier years where the ‘affordable’ tag was considered down-market and avoidable, 2018 saw almost every real estate developer – regardless of market footprint and previous category orientations – eager to take a bite out of the affordable housing pie.
In the mid segment, Bengaluru accounted for the highest share (31%), while in the affordable segment, Bengaluru ruled the roost (40%).
As per ANAROCK data, the new launch supply across top 7 cities is estimated to be 1,93,600 units by the end of 2018 – at 1,46,850 units in 2017, this is an increase of 32 percent over the previous year despite all headwinds.
Investments: As per data made available by Cushman & Wakefield, the residential sector raked inflows of Rs 126 billion (including residential platform deals) in year-to-date 2018, registering an increase of over 14 percent year-on-year from the same period last year.
Mumbai accounted for the lion’s share in inflows at 21 percent, followed by Chennai with an 11 percent share. The top 8 cities witnessed a substantial increase of around 35-37 percent in year-to-date residential launches from the corresponding period last year.
Housing sales in 2018 are estimated to be 2,45,500 units if we consider Q4 sales to match those of the preceding quarter – at 2,11,140 units in 2017, this is an annual increase of 16 percent, as per ANAROCK estimates.
Unsold housing stock stood at 6.87 lakh units in the third quarter of 2018. Considering that unsold housing stood at 7,44,000 units in the third quarter of 2017, the decline is a modest 8 percent over the previous year.
Should you buy now? Yes but only if it is a ready-to-move-in unit. If the project is 90 percent complete, commit a significant amount only when it is ready. Negotiate hard.
Plots did well in Gurugram market: With four floors being allowed in Gurugram, mid-tier builders started focussing on group housing on smaller plots as they required less capital outlay, involved lesser risks and did not come under the ambit of RERA, says Anckur Srivasttava of GenReal Advisers.
The year 2018 was a veritable roller-coaster ride for the Indian real estate. Despite signs of recovery across segments, the liquidity crunch – further exacerbated by the NBFC crisis – put all industry stakeholders on tenterhooks. Consolidation via mergers and acquisitions was rife in all sectors, completely redefining the concept of ‘financial health’ among players and drawing clear lines on who will survive the heat. This process will continue throughout 2019, as well, says Anuj Puri, Chairman – ANAROCK Property Consultants.
“The year 2018 saw consolidation in the Indian Real Estate market, as the stakeholders adapted to some irreversible paradigm shifts and initiatives aimed at streamlining the sector. Demonetisation, RERA, and implementation of GST had a combined effect on the real estate market. On the one hand, it ushered in transparency, accountability, and commitment in addition to eliminating unscrupulous players from the market, and on the other hand, it impacted the sales,” says Bijay Agarwal, managing director, Salarpuria Sattva Group.
“Due to improved transparency and accountability that came with the introduction of RERA and GST. Along with the sector making loan accessible at affordable rates by capitalizing affordable housing and Credit Linked Subsidy Scheme (CLSS), a deadline has been set by RERA for the completion of the projects, impelling the developers to improve and revisit their business model. The approval for affordable housing in the Union Budget 2017-18 by the government and its Pradhan Mantri Awas Yojana (PMAY) scheme has anticipated the growth of the Indian real estate sector at a high stride,” says Pradeep Aggarwal, co-founder and chairman, Signature Global and Chairman, National Council on Affordable Housing, ASSOCHAM.
“A key trend that emerged in 2018 was that of the Development Management (DM) model, which gave a new lease of life to several stalled real estate projects. Under this model, reputed developers stepped in as development managers and partnered with asset rich developers, helping them garner higher profits and complete projects on time, in exchange for management fees, or a share of the revenue profits,” adds Ashish Shah, COO, Radius Developers.