Adaptation to changed market is key to realty sector’s revival
CHANDIGARH: The wheels of the real estate sector are getting back on track. The key to change — the increasing adaptability of different real estate stakeholders, including the government and developers, to the changed market conditions.
REALTY PRODUCTS DESIGNED FOR AFFORDABLE DEMAND
The slowdown in the market in the wake of demonetisation and the introduction of the Goods and Services Tax (GST) pushed builders to re-evaluate their strategy to be still relevant in the sector. Earlier, in a speculation driven realty market, the developer seldom analysed the actual demand conditions and catered primarily to the investor only. This had widened the gap between the supply being created and the buyer demand. The slowdown further accentuated this mismatch between demand and supply.
“The last two years have provided enough time for the more prudent developers to start creating supply and products in tune to what the end-user wants. Most of the demand is concentrated in the affordable housing, and so developers are now creating smaller and more budget friendly homes,” says Deepak Badyal, a Ludhiana-based realtor. The state governments have also realised that developers must be given incentives to promote the affordable housing. Consequently, they have come with affordable housing for apartments and colonies, relaxing norms regarding floor area ratio, coverage and density. The state governments have also reduced charges like external development charges on developers creating supply in the affordable segment.
COMMERCIAL ADJUSTMENTS: FROM MALLS TO HIGH STREETS
The commercial realty segment took the worst hit in the slowdown. Large scale vacancy and sharp drop in prices pushed the developers out of the segment.
Another major factor contributing to developers getting stuck in the commercial segment were the failure of the shopping malls to attract both the retailers and the shoppers. “In Punjab, no city, including Ludhiana, could report success of shopping malls. Initially there was sharp growth in the commercial space available in the shopping malls across the state, with malls coming up in all major towns. But, in short period of time, developers realised that the mall model isn’t working in the state. Even in the partially successful mall, only the food courts, and the cinema halls did well, but on most occasions, the retails shops failed to elicit any response from buyers. People here prefer open spaces,” says Anil Dhingra, a Ludhianabased real estate consultant.
Developers are moving towards an alternative model now, away from big-sized malls. High-street commercial projects are coming with increasing frequency in different parts of the state, particularly on the Ludhaina-jalandhar national highway, and in Mohali. “There is lesser burden on the developer, commercial spaces and environs created are expected to attract greater number of retailers and shoppers,” says Dhingra.
DELIVERY IN FOCUS, NOT SUPPLY EXPANSION
Sticking to possession deadlines is the greatest change in the developer behaviour in the last one year besides the change in the products he is bringing in. While the delay in handing over possession was becoming a perennial problem, now, the things are changing. The endemic possession delays pushed the enduser out of the market as he witnessed builders turning a deaf ear to his complaints and hard earned life’s saving getting stuck in long delayed projects.
With the coming up of the real estate regulatory authorities, and streamlining of their working, the developer is now forced to focus on meeting the possession deadlines. Also, with a close check on the promises he makes and what he actual delivers, the developer has turned more positive towards buyer needs and complaints. The Rera (Real Estate Regulatory Authority) has transformed the developer behaviour and brought back the end-user to the market.
“The elimination of prelaunches and the associated ‘rolling’ of funds collected from customers from one project to the other have come to an almost complete halt under Rera. This has exacerbated the liquidity crunch of smaller developers. Large-scale consolidation of real estate assets and players is afoot, and very much on the cards in the foreseeable future as well.
This trend will eventually benefit consumers, as unscrupulous and financially undisciplined developers will be wiped out and buyers will get better products without the hitherto notorious delays, and with vastly reduced risks on their investments,” says Shobhit Agarwal, managing director and chief executive officer, ANAROCK Capital.