The year 2019 will be both challenging and opportunistic and the ones likely to succeed are those who embrace the changing market dynamics. Apart from elections, credit growth and improvements in infrastructure will set the tone for economic growth in the future.
Historically real estate prices have traditionally remained soft ahead of the elections, but have regained momentum afterwards. While the polls might not substantially impact property prices, they could slow down policy clearances and infrastructure projects critical to real estate. A stable government at the centre in 2019 will further boost the growth in the sector.
The lack of credit off take compounded by the current NBFC crisis has been a cause of worry for stakeholders in the sector. Despite the concerns, the economic indicators have remained positive with India's GDP growth rate pegged at 7.3 percent and inflation been reined in at 4.8 percent in 2018. However, more efforts will have to be put in 2019 to maintain the existing momentum.
In 2018, developers largely focused on clearing existing inventory and adjusting to the new policy requirements. The increased transparency and accountability has created a more efficient environment which has found favor with both domestic and institutional investors. The stringent measures enforced by Real Estate Regulatory Authority (RERA) has erased out non serious players and only credible developers with proven track record are driving the market, both organically and via consolidation. This is expected to continue in 2019 as well and we will see established names further capitalize on their brand to strike joint development deals with smaller players.
The implementation of title insurance that will lead to renewed confidence among buyers and will definitely impact the real estate market favourably. Digitisation of land records will further aid in improving transparency in the land records maintenance, updating settlement records and reducing the scope of land disputes, thereby enhancing the real estate market.
Affordable and mid-income housing took center stage in 2018 will continue to drive residential housing both in metro and Tier 2 cities. There been an uptick of almost 15-20 percent with preference for ready to move in units owing to RERA and GST benefits. The massive push for improvement in infrastructure by the Government of India (GOI), including significant capital expenditure for roads, railways, development of smaller airports and expansion of schools and hospitals at the outskirts will benefit this segment further. This will provide better connectivity and have a multiplier effect thereby allowing developers to explore new projects in the peripheral areas of the cities.
The Logistics & Warehousing sector gained significant traction this year after the centre granted infrastructure status to logistics. It is showing a massive growth owing to large infusion of foreign capital.
The commercial space in real estate is expected to remain the most buoyant force in the sector. Growing demand for Grade A office spaces across major cities, including new sectors like co-working spaces that is further expected to push the demand for commercial properties. The government’s push towards promoting start-ups and developing smart cities will create a lucrative environment for businesses to work and expand. Major markets in South India such as Bangalore and Chennai can gain further traction owing to fair pricing, increasing growth of IT companies.
Real Estate Investment Trusts (REIT) listings in 2019 will infuse liquidity in commercial real estate. It will fuel demand for office space from major sectors like logistics, manufacturing and consumer goods, besides IT and ITeS and the banking and financial services sectors. Rentals in metros and Tier-1 and Tier-II cities will continue to remain in demand.
Developer’s focus will further shift to customer centricity through the use of technology and digital platforms in the coming year. The ability to predict human behaviour through qualitative data analysis of social media such as ‘likes’ on Facebook, YouTube videos, twitter feeds and similar trends have become a game changer for the real estate sector. This will help them customize as per the ever evolving needs of the buyer.
To sum it up, 2019 will start on a cautious note due to the upcoming elections, but will pick up significant momentum thereafter, in all real estate segments.
Surendra Hiranandani is the founder & director of House of Hiranandani.