Mas­sive in­vest­ment boost for In­dian res­i­den­tial sec­tor in 2017

Res­i­den­tial sec­tor ac­counted for 54% of real es­tate in­vest­ments in the first half of 2017

Hindustan Times (Chandigarh) - Estates - - FRONT PAGE - Anuj Puri feed­back@livemint.com Anuj Puri is chair­man, Anarock Prop­erty Con­sul­tants

In In­dian real es­tate to­day, the un­trained eye may see a di­chotomy in the mas­sive in­vest­ments pour­ing into the In­dian res­i­den­tial sec­tor and the ac­tual on-ground de­mand for hous­ing. A sim­i­lar ques­tion mark was, in the past, also at­tached to the fact that devel­op­ers kept churn­ing out projects de­spite the vis­i­bly re­duced up­take over the last cou­ple of years. The fact is, there are al­ways at least two sto­ry­lines un­fold­ing - the first and most ob­vi­ous is the short-term story.

Cur­rently, res­i­den­tial de­mand is still sub­dued due to the un­cer­tainty brought on by many reg­u­la­tory up­heavals - all of which were nec­es­sary to make In­dian real es­tate a better mar­ket­place. To be­gin with, the Govern­ment’s un­ex­pected de­mon­e­ti­za­tion move late last year put a se­vere damp­ener on the re­sale mar­ket and also im­pacted the pri­mary mar­ket to some ex­tent. Even as the mar­kets were re­cov­er­ing, RERA and GST - both of which were pre­dicted and ex­pected - caused con­sid­er­able con­fu­sion among both devel­op­ers and buy­ers.

Tak­ing a good look at the short-term story on the end-user side, the state of up­heaval is a re­sult of an en­forced ma­tur­ing process. The tur­moil this process brings with it could be com­pared to the grow­ing pains one ex­pe­ri­ences dur­ing ado­les­cence.

How­ever, the long-term story presents a far dif­fer­ent – and, from the point of view of in­sti­tu­tional in­vestors, a very com­pelling pic­ture.

Much like in the stock mar­ket, the most op­ti­mal en­try point for res­i­den­tial real es­tate in­vestors is the low­est one. One does not in­vest when de­mand and prices are at their peak, but when they have ‘troughed out’ and when se­ri­ous re­vival is im­mi­nent but not yet gen­er­ally per­cep­ti­ble. Also, one does not in­vest when one’s in­vest­ments are not pro­tected by strong laws.

In fact, res­i­den­tial prop­erty re­mained the most pre­ferred as­set class in In­dian real es­tate dur­ing H1 2017. While over­all in­vest­ments in In­dian realty touched $1990 mil­lion in this pe­riod, the res­i­den­tial sec­tor ac­counted for 54% ($1075 mil­lion) of to­tal in­vest­ments. In the same pe­riod, in­vest­ments into com­mer­cial realty ac­counted for 40% ($796 mil­lion) and re­tail re­ceived 6% ($119 mil­lion) of to­tal real es­tate in­vest­ments.

WHAT DRIVES THIS TREND?

In­sti­tu­tional in­vestors have for long been wait­ing for greater trans­parency in the In­dian real es­tate mar­ket, which has now ar­rived with the de­ploy­ment of RERA and GST. While end-user sen­ti­ment is only be­gin­ning to re­vive now as clar­ity about the new reg­u­la­tory changes emerges, the pent-up de­mand for homes is In­dia is be­yond ques­tion.

RERA will now en­sure that only strong, cred­i­ble devel­op­ers with trans­par­ent busi­ness prac­tices and abil­ity to com­plete projects on time re­main. Si­mul­ta­ne­ously, the sup­ply pipe­line has mod­er­ated - partly be­cause non­cred­i­ble play­ers are forced to with­draw from the mar­ket, and partly be­cause devel­op­ers are be­ing more cau­tious with their project launches.

All in­di­ca­tors point to­wards a de­ci­sive re­turn of buyer in­ter­est over the next 18-24 months. In­sti­tu­tional in­vestors, who are al­most by def­i­ni­tion in it for the long haul, are squarely fo­cused on the pos­i­tive sig­nals for the fu­ture now em­a­nat­ing from the In­dian res­i­den­tial prop­erty mar­ket.

DE­MAND HAS NEVER BEEN STRONGER

In­dia still has amas­sive short­fall of hous­ing, and the Govern­ment is dis­play­ing se­ri­ous in­tent on ful­fill­ing its prom­ise to de­liver Hous­ing for All by 2022. It has de­ployed sev­eral im­por­tant pol­icy-level ini­tia­tives to make hous­ing more af­ford­able for first-time buy­ers - and af­ford­able hous­ing amore at­trac­tive propo­si­tion for devel­op­ers. RERA is ef­fect­ing a ma­jor clean-up of the in­dus­try, leav­ing only strong and cred­i­ble play­ers in its wake, while GST has en­sured a uni­form and trans­par­ent tax­a­tion regime.

A large-scale re­vival of the res­i­den­tial sec­tor, in­duced by rapid-fire reg­u­la­tory re­forms back­ing amas­sive pent-up hous­ing de­mand of around 19 mil­lion homes, is now more than pos­si­ble in the next 18-24 months. Un­sur­pris­ingly, in­sti­tu­tional in­vestors have picked this as the right time to de­ploy their cap­i­tal into the In­dian hous­ing sec­tor.

While af­ford­able and mid-in­come hous­ing are at­tract­ing the lion’s share of in­vest­ments, in­sti­tu­tional in­vestors are also mak­ing cal­cu­lated plays into se­lect in­te­grated town­ships, which they have cor­rectly iden­ti­fied as the next stage of hous­ing evo­lu­tion in a coun­try where in­fra­struc­ture de­vel­op­ment is not keep­ing up with hous­ing de­vel­op­ment. Si­mul­ta­ne­ously, buyer sen­ti­ment has be­gun re­viv­ing on the back of ra­tio­nal­ized prop­erty prices, re­duced home loan in­ter­est rates and the fact that RERA of­fers a vi­able level of pro­tec­tion to con­sumers.

Al­ready, mar­ket in­di­ca­tors now point to­wards in­creased sales dur­ing the com­ing fes­tive sea­son be­cause of im­proved buyer con­fi­dence post RERA. The RBI’s re­cent re­duc­tion in bank rates will also en­cour­age buy­ers to ex­pe­dite their buy­ing de­ci­sion to take the ad­van­tage of lower home loan rates. Dur­ing this fes­tive sea­son, tier 1 devel­op­ers will be­come most ac­tive with launch­ing new projects which had been kept on hold to meet the RERA norms. On the in­vest­ments side, all eyes are now on the op­por­tu­ni­ties that present them­selves in a mar­ket which is poised for a full-fledged re­vival in the fore­see­able fu­ture.

MINT/FILE

Af­ford­able and mid­in­come hous­ing are at­tract­ing the lion’s share of in­vest­ments.

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