The year 2017 has been the most eventful period for the Indian Real Estate sector with new regulations and policy changes, following demonetization, roll out of RERA, Benami Transaction Prohibition, REITS, and GST. All of these have had a cascading impact on the real estate market, which experienced a slowdown for several months. However, it is anticipated that the new policies will help the industry become more organized, transparent, and accountable, which will boost buyer sentiment in both residential and commercial segments.
Presenting here are the views of some renowned real estate developers on the year that was, and their outlook for 2018. It is heartening to see that they are unanimous in their view that the consolidation of the major reforms will see a remarkable transformation in the real estate sector.
Mr. Irfan Razack, CMD, Prestige Group
While the market witnessed some turmoil, with several developers extending offers and schemes to ensure sales, at Prestige, we managed to meet our sales targets by selling from the current inventory that was under production. Looking back, 2017, I feel, turned out to be a brilliant year for the company.
In April 2017, we restructured the company by segregating the retail, residential, office and hospitality portfolios into 4 separate segments. This helped us look at the business from a different perspective. We intend to scale these segments over time. We are also exploring new cities and hope to be in the west and north by the end of 2018.
The residential real estate market has picked up pace as demand is growing steadily. I think that the long-term impact of the recent economic reforms will only add to the growing enthusiasm and positive outlook for real estate in India. With rapid urbanization, the demand for housing in the affordable and mid-income group segments has always seen an upward growth trajectory. As long as developers are able to produce homes between Rs. 25 lakhs to Rs 100 lakhs, there will always be a constant demand.
Going forward, factors like rapid urbanization, increased migration to cosmopolitan and Tier 1 cities, and the Government’s focus on infrastructure and affordable housing will give the required impetus and push to the real estate sector.
In fact, the demand for commercial space is seen as a litmus test for the overall health of the economy. With businesses flourishing globally and several processes getting outsourced to India, the absorption of commercial space is on the rise. We have near zero vacancy in our office developments. We are launching 2-3 large-scale IT developments in Bangalore, and simultaneously, we will be developing an IT Park in Pune and an office building in Gift City.
Retail malls have been doing extremely good business. In the retail space, we will be opening the Mysore Centre City Mall in January. Forum Prestige Shantiniketan in Whitefield is expected to be ready in the second quarter of 2018. Both our hospitality projects: The Sheraton Grand and The Conrad will start operations from February.
Mr. Samyak Jain, Director, Siddha Group
As India adjusted to demonetization, the government provided some relief in the Union Budget 2017-18 by granting infrastructure status to the affordable housing sector, showing its intention to make ‘Housing for All by 2022’ a reality. The status grant came with a plethora of benefits to developers such as availability of prime land parcels, access to funds, along with faster approval, thereby incentivizing them to develop affordable housing projects. The government also liberalized FDI rules making it easier for NRIs and foreign investors to purchase properties in the country, and facilitate the generation of foreign exchange for infrastructure developments and strengthen the nation’s economy.
The implementation of RERA brought in the much-needed transparency and initially infused accountability in the sector. There was ambiguity about the Act and the registration processes, but as time went by, it brought more clarity in the system. The Act has not only encapsulated the interests of the home buyers, but has also ensured speedy redressal of disputes, which has helped gain confidence amongst the consumers.
The Act consists of a registration mandate, and strong penalties to ensure that the home buyers feel secure about their investments, which has further helped to enhance the residential sales. The introduction of GST in July 2017 aimed to dismantle the multiple tax system and make way for ‘One Nation One Tax’. The GST rate for real estate has been fixed at 12 percent. In the near future, there will be more clarity on GST and we will be able to assess the new taxation system.
However, we feel that GST will prove beneficial for the real estate as well as for the general economy in India. The domestic and foreign investor’s sentiments were escalated with a jump in India’s rank by 30 spots to secure a place among the top 100 countries on World Bank’s ease of doing business ranking list. This is quite an achievement. The real estate market has largely benefitted from the cumulative effect of these reforms, which will help propel growth of the sector, going forward.
In 2018, the expectations of the buyers and developers will rise as the sector has witnessed new government policies. The amalgamation of these policies will help the industry to be more organized and provide a boost to both residential and commercial segments. The country’s first maiden Real Estate Investment Trust (REIT) is expected to be launched in the first quarter of 2018. This would go a long way in bringinging further tranperancy in real estate and help in curbing benami transactions. Very soon, the Housing Industry Regulation Act (HIRA) will be implemented in West Bengal, and we believe that the real estate market dynamics will improve further, making deals more transparent and fairer to the buyers.
The volume of online transactions just a year after demonetization has increased manifold. Digitization has paved the way for an organized approach in terms of purchasing property, land acquisition, ownership records and documentation, and has significantly improved the ease of doing business in the sector. With the consolidation of these reforms there is a bright future in store for the real estate sector, and it will see a remarkable transformation in the long run.
Mr. Vineet Relia, MD, SARE Homes
Mr. Harinder Dhillon, VP - Sales, DLF
Shri P.N.Misra, CMD, Paarth Infrabuild Pvt. Ltd.
PMAY provides that if a private developer on his own land, promotes affordable housing, then the allottee should get all the benefits prescribed in the scheme. However, other segments like grants to individual houses in un-planned settlements, and grants to local bodies in upgrading the units are considered and local bodies are made to promote such projects, the main area being affordable housing, which may boost the supply line in the housing market. The resources of the vast workplace of disciplined private developers need to be better utilized by making the process liberal and free from bureaucratic complexities.
Presently, the complete absence of the private sector from this segment is a worrying sign. The real estate creates a multiplier effect on the economy, and for the economy to create jobs, the real estate sector must take the lead.
Ms. Anita Arjundas, MD, Mahindra Lifespace Developers
Recent months have witnessed sustained demand in end-user-driven markets and is now back to pre-demonetisation levels, while speculative buying, especially in the luxury segment, has declined sharply. Furthermore, there has been significant FDI equity inflow into construction development, an indicator of rising confidence in the sector and the India growth story.
As India’s real estate sector makes the transition towards increased transparency, structured and stakeholder-friendly marketplace, 2018 could well mark the beginning of a period of sustained revival for the sector. Regulated and organised realty is a healthy and sustainable asset class globally; In India, structural reforms and changes in FDI norms are making real estate increasingly attractive to domestic and foreign investors.
The awarding of vital ‘infrastructure’ status for affordable housing will show positive results in the months ahead. Additionally, we feel that the affordable housing segment will further strengthen its position as a key growth driver of the real estate sector in 2018 since unit sales and launches will increasingly be dominated by the sub-50-lakh category.
Mr. Tushad Dubash, Director, Duville Estates
Pune’s residential property market will remain positive, and areas that offer better affordability and returns on investment will pick up. IT/ITeS continue to be the key demand driver for residential real estate in Pune; the Kharadi micro market is a strong example of this. Technology will play a key role as residential developers explore newer ways to optimize space utilization within their projects. The proposed plan for the development of Pune Metro will impact prominent areas on the city’s CBD belt along with areas of Hinjewadi, Aundh, Pimpri-Chinchwad, Kharadi and Viman Nagar. As 2018 kicks off, developers and consumers alike will have grown accustomed to the new industry landscape created by GST and RERA, and it will be interesting to see the positive impact that this will have on the industry in the year ahead.
Mr. Rahul Singla, Director, Mapsko Group
GST will bring a lot of transparency in the real estate sector and minimize unscrupulous transactions in 2018. RERA, whose main function is to bring accountability in the sector by streamlining the entire process, is not going to have much of the effect on the organised sector, but the unorganized sector is going to face problems relating to it. Ready-to-move–in apartments are going to earn extra interest from the buyers as these save the construction timing and are the best option for them. The future is bright as the market is expected to pick up and continue like this.
Mr. Ravish Kapoor, Director, Elan Group
Many developers and private equity players are also partnering with developers active in this space to earn more profit in the sector. We believe that the Indian real estate sector will emerge stronger, healthier and capable of sustained growth.
Mr. Pankaj Bansal, Director, M3M Group
Mr. Sumit Berry, MD, BDI Group
Affordable housing finally got the much-coveted infrastructure status. One crore houses are to be built in rural India by 2019, and this vital segment will now see cheaper sources of finance, which will give further boost to the sector. The country’s real estate markets are definitely poised for growth in the medium-to-long term on the back of higher transparency and further consolidation. The demonetization move along with the Benami Transactions Act, proved to be profitable to the entire segment.
Mr. Vineet Taing, President, Vatika Business Centre
Another interesting industry trend that’s been observed is office occupiers in Gurgaon are pre-committing office spaces in under-construction, especially in central business districts of Gurgaon, to secure themselves against high or rising future rentals. For the year 2018, the tidal growth for office spaces will continue as larger corporates and smaller companies are increasingly opting for co-working spaces.
Mr. Gaurav Mittal, MD, CHD Developers Ltd
2018 will also be the year of affordable housing. Since the market is consumer friendly, buyers will tend to invest in the affordable housing segment owing to greater options at affordable prices and good investment returns with time bound possession. The loan interest rates are low, making banks more supportive and thereby encouraging the buyer to invest. We believe that the long-term market dynamics for the sector will remain positive, especially in the residential market.
Mr. Ram Walase, MD & CEO, VBHC
The land prices in urban areas are still higher for developing affordable housing. While RERA brings a lot of clarity with respect to the Developer-Customer relationship, more needs to be done to ensure hassle-free approval processes, land record verifications and stamp duty rationalization.
India’s rapid urbanization story promises a lot for the sector and the Affordable Housing segment continues to provide good sales velocities. With RERA and GST, unfair arbitrage has reduced, and the organized players have a level playing field
The current trend of limited new launches and muted price inflation would continue in 2018. The end-user demand, especially in the affordable housing segment, would continue to be the bright spot – primarily driven by PMAY subsidies and the favorable government policies for the segment.