Year 2018 witnessed a lot of home seekers delaying their purchase decision for various reasons. From rumours of residential real estate prices coming down, to the reality that price appreciation would not be as fast and high as it used to, concerns over RERA and confusion over GST, a host of factors had buyers being anxious fence-sitters all through. With 2019 having commenced, the question obviously is what lies ahead? What are the opportunities available within India and markets across the globe?
Providing a 2017-18 comparison and 2019 perspective, Ramesh Nair, CEO and Country Head, JLL India, opined that with the supply side likely to remain strong in 2019 and prices remaining stable across the country, the market will be favourable for home buyers in times to come. While there has been a spurt in residential launches in 2018, a possible rationalisation in GST rates for under-construction properties is on the anvil. These positive developments along with implementation of RERA, is good news for home buyers. Developments in Delhi-NCR, Bengaluru and Mumbai reflect the popular sentiment in the market. A recovery in the housing segment in these cities will bring back buyer's faith in the residential market, he underlined.
As per JLLI research, after a prolonged lull of nearly three years, residential markets in Mumbai and Delhi NCR showed definite signs of recovery in 2018. The positive impact of the regulatory reforms including the implementation of RERA and GST is now evident.
New launches (units) in Mumbai (including Mumbai city, Mumbai suburbs, Thane city and Navi Mumbai) increased from 32,842 to 39,970 in 2018, up 22% while Delhi NCR (including Delhi, Faridabad, Ghaziabad, Noida-Greater Noida and Gurugram) witnessed a rise from 8,247 to 17,660, up 114%. Sales (units) in Mumbai were up 10% from 24,383 to 26,858 while Delhi NCR saw 71% growth from 14,440 to 24,725 during the same period according to JLL REIS.
The rise in launches has, however, added to the number of years that is needed to sell (YTS) the existing unsold inventory in the cities. As a result of the higher quantum of unsold inventory and sluggish demand of past few years, housing prices have remained steady. The stability in the rates is likely to push the sales momentum in 2019.
Mona Jalota, Founder & MD, Krypton Global Investments, said that year 2018 was a watershed year for the domestic real estate industry which saw many impactful initiatives of 2017 taking a firm shape. Even though the demonetisation and RERA put brakes on the growth of the overall residential sector, incentive policies by the government and effective implementation of RERA impacted the affordable housing sector positively.
“With the sluggish realty market in recent times, the various changes implemented by the government, and high overall pricing in the major metros, which offer little or no growth potential, poor infrastructure and poorer rental returns, and investors realising that returns from the domestic sector would perhaps take as long as 15 years, international markets gained flavour with the HNI investors. Many foreign real estate markets work and operate in a much more transparent manner. There are no delays or another red tape due to bureaucratic processes or paperwork thereby increasingly grabbing the attention of Indian investors,” she pointed out.
According to her, while all these reasons are making people look beyond the Indian real estate market, some countries offer residency and citizenship benefits if anybody owns a property in that country. So, if someone plans to migrate at some point in the future to that country, investing in real estate can be a good way to attain an easy access to residency.
Unlike Indian real estate markets, where there is a higher capital appreciation year on year, foreign markets demonstrate better rental appreciation. So, hoping to make a purchase and expecting the prices to escalate overnight within a year or two is highly an unlikely scenario. Most overseas markets are mature and hence would enjoy a stable capital appreciation. Having said that, if one has the vision to be a longterm player, one can not only enjoy the benefits of a steady rental income but also look forward to a reasonable and sometimes excellent capital appreciation in the five-year horizon, Mona opined. So while all eyes are now on the next meeting of the GST Council, it seems that 2019 should be a better year for self-use home seekers to take the plunge and get their own residence.