The Indian residential real estate market has flourished in the last 14 years. It has literally been a roller coaster ride from the year 2003 to 2008 with prices skyrocketing and in some cases almost doubling. However, there was a 2-year slowdown because of the global economic crash. Again, 2010-2014, improved and saw demand and supply making the prices to rise again. But, after 2014, there has been a steady decline in the sales coming down to half and prices remaining flat.
Due to false promises and project delays, the homebuyers also lost their trust towards the builders and developers community during this time. There was immense disappointment towards the developer community. Besides, real estate has been considered a safe sanctum for dumping black money, but the reforms brought in by the Indian government such as Real Estate (Regulation and Development) Act (RERA), Goods and Services Tax (GST) and Demonetisation to control the black money threat has hit the sector hard.
The developers had been launching 40-45,000 homes (units) in each of the first three quarters of FY17 (Apr 2016-Dec 2016) in the top nine cities of India including in the dreaded third quarter when demonetisation took place. During the first three months of 2017, there were about 51,000 units being launched. This was possible because of improved thinking post demonetisation and also to get in before RERA got implemented. As the builders and developers got busy with applying for RERA approvals for existing and ongoing projects, launches collapsed to about 30,000 units in April to June this year.
What to look forward to in the Future: In 2017, the Government of India made it clear to the home buyers that they will no longer be at the mercy of real estate developers by putting various measures in place to ensure that housing supply matches up with the demand and that pertinent projects are developed. No doubt there are some troubles along the way – some of them very apparent – in the form of implementing and executing the new policies and reforms that have been formulated. However, they have made a deep impact even now.
Affordable Housing is going to be the next big thing in 2018 given the thrust by the government. The government of India has granted it with the much-awaited infrastructure status. The description of affordable housing and houses, which was classified under mid-income group was also changed by the government of India to cover a vast buyer base and help builders and developers in offloading their budget homes tally.
It is believed by experts that the year 2018 is unlikely to see any price rise; however, the recent reforms will boost the confidence of the home buyers and sales are likely to pick up in 2018. When compared with those of 2017, the real estate market in 2018 is expected to show price levels on a similar scale. It is estimated that the year 2018 is considered to be a good time to buy as it is expected that the real estate market will see more options in ready stock since a greater number of project completions are to take place in the next year.
We cannot expect to see an overwhelming recovery in the residential market sector in 2018, but it is certain that whatever recovery and growth we see from here onwards will be sustainable and supported by powerful market fundamentals than ever before. The days of speculative peaks and troughs are gone and safely behind us.
With the help of demonetisation, the government of India wanted to crack a whip on black money hoarders. By demonetising the Rs 500 and Rs 1,000 currency notes, it was expected to have a cooling effect on many pockets of the property market in the country. Since traditionally in majority of the real estate deals, cash has been an integral component of payment, the note ban was expected to hit real estate sales.
During the demonetisation quarter going by the latest House Price Index (HPI) figures released on RBI’s website as against general perception, the real estate prices actually increased across the country. During the third quarter of 2016-17 in seven out of ten cities sampled in the RBI Housing Price Index show an increase in housing prices.
The RBI’s Housing Price Index indicates the data obtained from the property registrars across the country. The increase in housing prices in question here could be as a result of the fact that the Benami Transactions Act as well as demonetisation caused a rush among property owners to register their properties at prices, which are closer to the market rate. In this respect, it is a unique phenomenon in the history of Indian real estate as all avenues to register property transactions at lower values have now been closed.
This may have happened also due to the fact that the public did not want to become potential subjects to investigation, and would prefer their property holdings and ownership to be legitimate in all aspects.
The sales are yet to catch up to the pre-demonetisation level in some of the real estate markets. However, experts remain optimistic and believe that the real estate market is going through a transitional phase. Things are going to get better over time and the introduction of reforms will only help in shaping up the industry to become a more consumer-friendly market.
With the government aiming for “housing for all by 2022,” experts believe that 2018 is the year of affordable housing. The consumer’s sentiments have been restored to a great extent with the help of reforms like RERA and this has helped the sector to step on the path of revival. The year 2017 was considered as the year of disruption with the introduction of policy initiatives in the form of RERA, GST, Benami Property Act, etc. and with demonetization targeting black money hoarders. The year 2018 is considered as the year of renewal with affordable housing becoming a reality and transparency and greater consolidation.