Facing severe headwinds due to weak non-supporting economy and liquidity crisis, the real estate sector’s overall performance was below expectations in 2019. But with residential real estate showing signs of a pickup with a marginal increase in sales and commercial real estate already having a good run, the year 2020 holds the promise of revival. The capital crunch amidst a weak economy has turned out to be the biggest bane of real estate sector. With the prevailing crisis in the NBFC and banking sector, the developers are starved of funds to either complete large number of stalled projects with lakhs of incomplete units or launch new projects. According to CITI report, Rs 80000 crore of value is locked installed projects across 7 top cities. With the drying up of NBFC funding ,the plight of real estate sector can be well imagined as prior to the crisis, NBFCs catered to 60% of overall capital needs of developers in the absence of adequate bank funding.
Despite the subdued sentiment of the sector, particularly residential real estate hit by fund squeeze , there face been however many positives. The measures taken by the government to ease fund squeeze like recapitalisation of banks and partial guarantee scheme for NBFCs did show positive results. Between September 2018 and September 2019, NBFCs minus HFCs grew from Rs 28.3 trillion to Rs 31.95 trillion,
showing average asset growth of 19.7%. The bank credit for NBFCs is also reviving. This improvement has kindled the interest of global investors. Leading global alternative asset manager Investor is in the
process of setting up a NBFC focused on affordable housing and addressing last – mile funding. The end – user-driven residential market, despite all odds, is set on the path of recovery. This is clearly evident from the pickup in housing launches and sales. There was 18-20% annual growth in home launches
while home sales showed noteworthy growth. The residential sales across top cities registered a 5% increase during last year, with about 1.54 lakh crore worth of homes sold. The housing sales value of top 9 listed players has touched Rs 108 billion in Q2 and Q3 of 2019. The stagnant prices, interest
subsidy under PMAY, lower home loan rates and GST benefit did the trick. As a result of this, the unsold residential inventory overhang in the top 7 cities got reduced to 30 months by Q3 2019.
There is this promising dominant trend of home buyers lapping up ready-to-move homes (with zero development risk and zero GST) that is pushing up home sales. According to Samir Jasuja, Founder & MD, PropEquity, residential real estate also witnessed an interesting trend of South India doing significantly
better than other parts of the country as opposed to rest of India witnessing oversupply, South fell short in supply with increasing demand from the IT sector.
In the residential sector, while luxury housing is getting muted response, while affordable housing today is the dominant theme , turning out to be a saviour for the residential sector. The rise of affordable housing has been made possible due to favourable policies of the government. Earlier affordable housing was granted infrastructure status and a dedicated fund was created under NHB to give a boost to affordable housing. The policy measures like a hike in carpet area, liberalising income criteria and enlarging the scope of CLSS under PMAY to include mid-income homes (up to Rs 45 lakh) has given much impetus to affordable housing. Further, in a fresh booster dose, the interest deduction limit on home loan for affordable housing was raised to Rs 3.5 lakh.
Thanks to favourable policies, affordable housing sales have gained traction. According to Liases Foras, apartments costing less than 50 lakhs comprised 57% of total sales in September quarter in 35 cities. The highest number of new launches in this quarter were also in this segment. PropTiger data shows that
nearly 4.5 lakh affordable homes well be delivered in 15 months and overall 7.95 lakh units will
come into the market by December 2020. With such a creditable performance, affordable housing has drawn many big developers to its fold.
Despite under performance, real estate continues to hold promise as an investment- friendly asset class, recording about a 9% annual increase in investment flows to $6.2 billion. While strong occupier demand and rental appreciation is drawing investors to the commercial office segment, foreign investors have been bullish about affordable housing as well. Notwithstanding the prevailing low sentiment, the year 2020 heralds a hope of positive results due to policy measures initiated to revive realty. The deployment of
Rs 25000 crore Stress Asset Fund created by the Centre to complete lakhs of stalled housing
units will unlock huge value, creating fresh demand and supply, in turn catalysing the process of recovery.
Menu