India’s real estate has much to look forward in the new year

Funding issues and timely completions should see fruition

The year 2019 was a mixed bag of opportunities and disappointments for Indian real estate. The industry largely remained stagnant, with declining consumption, low investment appetite and property prices in most cities not budging from current levels.

India’s GDP growth reached 4.5 per cent in the second quarter of this financial year — the lowest in the last six years.

In the residential segment, affordable housing was the winner with nearly 40 per cent share of the estimated 230,000 new unit launches. The second-highest share was of the mid-segment at 33 per cent, followed by the luxury and ultra-luxury segment with 10 per cent.

Sales in the housing sector saw a modest 4-5 per cent yearon-year growth in 2019 with 258,000 homes estimated to be sold. New housing launches saw 18-20 per cent annual growth with new launches in the region of over 230,000 units.

The government’s interventions throughout the year — such as the creation of an alternative investment fund of Rs250 billion (Dh12.86 billion) for funding of stuck projects, reduction in corporate taxes, and various tax benefits on affordable housing purchase did not yield an immediate effect. But the benefits will become evident in 2020.

The time is right for investing in India before prices harden.

Greater transparency with more projects getting registered with RERA (Real Estate (Regulation) Act) gives NRIs reason to regain confidence in Indian real estate. This increasing transparency means timely delivery of projects. There is now a grievance redressal system in place to safeguard the investor interests.

The commercial office segment remained vibrant and has been a big draw for foreign investors thanks to steady demand and rising rentals.

As housing prices remain stagnant, NRIs can target quality projects at affordable prices, including office spaces.

What to expect

The ongoing liquidity crisis will result in increasing consolidation, leading to the stronger emergence of branded developers. This reduces the risk factor for housing investments significantly. Merging of the NRI portfolio route with Foreign

Portfolio Investment route results in a wider product spread.

The first-half of 2020 may not see much traction as most of the government initiatives and other positive developments need time to take root. The second-half will begin to show more rapid growth.

Property prices will see very gradual growth as the market remains bullish on the slow revival of residential projects. The government is expected to roll out new policies to improve investor sentiments and boost sales. The key sectors for investment will be affordable housing, co-working/co-living spaces, logistics and warehousing, and offices.