From affordable housing to co-working spaces — here’s how 2018 fared for Indian real estate

(Photo Source: Reuters)

2018 turned out to be something of a mixed bag for the Indian real estate sector, marked by improvement in sales and some stability but only after the double blow of GST and demonetisation and a liquidity crisis.

Stronger regulation

On the regulatory front, while India has taken some key steps to protect home buyers through the Real Estate Regulation and Development Act (RERA), most states are apparently et to set up a permanent regulator.

"Currently 28 states and union territories have notified rules under RERA and 15 of these have established a permanent regulator, the latest one being Delhi, which appointed a full-time regulator in November. As of November, more than 34,000 projects had been registered under RERA," Anshuman Magazine, Chairman, India and South East Asia region for CBRE, a global commercial real estate investment company, told IANS.

However, India’s new Insolvency and Bankruptcy Code (IBC), has introduced a provision to include home buyers as secured financial creditors in case of bankruptcy proceedings, meaning they will receive invested funds in case the property or builder declares bankruptcy.

Liquidity crunch

A major headache for the sector this year proved to be the liquidity crunch, which came to light when the lending major Infrastructure Leasing & Financial Services (IL&FS) defaulted on its commercial papers in September.

Parth Mehta, MD of Paradigm Realty told IANS: "The liquidity crunch that is going on currently has given a tough time to the real-estate sector as developer can't slow down their construction to meet the RERA (Real Estate Regulation and Development Act) timeline and on the other side NBFCs have stopped disbursals even against approved sanctions."

"This liquidity crunch hit both developers and buyers and has led to a slowdown in home buying decisions creating mismatch in housing demand-supply," Mehta said.

In fact, the liquidity crunch will continue to be in the upcoming year.

Co-working

(Photo Source: dfordelhi.in)

2018 also saw a rise in co-working spaces popular among entrepreneurs and companies offering remote work options. It has been an emerging sector for commercial real estate in India with startups investing more because of space constraint. Over 50% of the total leasing in India comes from Bengaluru and Delhi-NCR, making them the largest markets for co-working models. Bengaluru has shown a rise of 37% for the commercial real estate.

Affordable housing

(Photo Source: proptiger.com)
Affordable housing got a big boost this year with the Indian government incentivising the sector with favourable tax structure. In fact, the growth and demand in affordable housing segment has been faster than the overall demand in Indian real estate. The government has also provided interest subsidies to Low Income Group (LIG) and Middle Income Group (MIG) under Pradhan Mantri Awas Yojana (PMAY).

Housing sales

(Photo Source: indiaproperty.com)

The commercial real estate has performed better than housing sales this year because of demand from investors and sufficient funds. With the depreciation in the Indian rupee against the dollar, the sector has attracted more Non Resident Indian (NRI investments), who invested over ₹699.6 billion in the current fiscal.

While the housing sector has witnessed a rise of 50% in terms of sales this year, ready-to-move-in homes will continue to attract investments. However, the liquidity crunch has decelerated the home buying process for both developers and buyers.

Overall, according to data from PropTiger.com, housing sales in nine major cities in India was 25% higher than last year. The number of new launches dropped significantly by 22% compared to last year.

With inputs from IANS