Reforms leading to higher expectations

In its year-end assessment of the Real Estate Sector, ICRA has maintained a negative outlook for the residential real estate (RRE) segment and a stable outlook for commercial real estate (CRE) segment.

Report by ICRA Ltd.

The RRE has witnessed a prolonged downcycle owing to high inventory, muted demand, weak affordability, and declining investor interest. However structural changes over the last two years in the form of Real Estate Development and Regulation Act (RERAD Act) and Goods & Services Tax (GST), along with increased government focus on affordable housing, have raised expectations of demand revival. While these expectations have played out to some extent in certain property segments and micro-markets, a broad-based recovery in demand across the country appears to be some time away. States such as Maharashtra and Karnataka which have seen relatively better implementation of the RERAD Act are benefiting from increasing confidence of end-users. Demand in the premium and luxury category of residential segment are likely to remain suppressed for under-development projects due to the increasing preference for completed properties under the GST regime.

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