Current Scenario of Real Estate Market in India

Indian real estate is going through some of the major transformations in recent years. Several big decisions and new policies have affected the real estate market positively as well as negatively. The introduction of a few policy changes by the government, such as demonetization, RERA, and REITs in 2016, followed by simplified taxation system (GST) and FDI in 2017, has impacted eminently on the Indian real estate sector.

There is a possibility that the upcoming years are going to be bumper years for the realty market if we look at the positive aspects of the reform. The impetus in sales and transactions can be expected as the need to own real assets for the end user as well as the investors are perennial. A lot of institutional capital is already flowing into the sector and this transformation has enticed the eyes of domestic and foreign investors, increasing the capital flow in the Real Estate Market. Although it has still been a struggle for the developers and builders to deal effectively with the new regulatory forms, the perfect time for buyers to own property is now.

• Buyer favoring market:

  Before 2016, lack of strong regulations in the property sector had encouraged many developers to launch many projects at once without the guarantee of their completion. Now due to the implementation of RERA (Real Estate Regulation and Development Act, 2016), a deadline has been fixed for every project and thus has increased the transparency in the business. There is a drop in prices and an increase in the availability of ready ­to ­move ­in homes due to the developers being engaged in completing the ongoing projects and selling the existing quickly.

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• Lowering of new project launches:

  New project launches by developers have decreased by 29%, according to the Centre for Monitoring Indian Economy. To ascertain the impact of RERA, developers are putting a hold on new project launches. For this reason, property prices have fallen and even stagnated, especially in areas where investment was the driving mechanism of the market.

• Increase of Global Investors:

  Investments by global investors has increased recently which is one of the major signs of revival for the Indian property market. India has been ranked fourth in terms of Foreign Direct Investment (FDI) inflows in the World Investment Report 2016 20­17 by the United Nations Conference for trade and development. The overall improvement of the regulatory framework, credibility and transparency, foreign investors as well as NRIs find the country’s real estate market more dependable.

• Ever increasing housing demand:

  The affordable housing sector is supposed to be the next big growth driver for the Indian market as experts are predicting a phenomenal growth rate of over 30%. Developers who are working on affordable housing projects have the advantage of diverse and cheaper sources of funding which would ultimately lower the borrowing costs of the developer who should in turn pass on the savings to the investors and buyers.

• Government initiatives boost for real estate sector:

  The enactment of GST and RERA Act 2016 is a major move towards protecting the interest of the buyers from exploitative and unscrupulous developers and builders. This crucial initiative of the government has allowed the buyers and investors to track every stage of the construction of their buildings and properties until its completion.

• Market consolidation:

  In the past few years in India, the lack of financing options and fewer sales have led developers to over ­leverage. This means that small time developers may have to sell off their assets or have to venture with more big and reputed developers. The overcrowded real estate sector is expected to get leaner as a result of this consolidation of the property market. Consolidation will happen byways of joint ventures and developments of smaller developers with better organized and bigger developers, and struggling developers selling their land to stronger players with a better appetite for growth.

Several small builders with over leveraged projects are already looking for investments and rescue from bigger developers, with several more sitting on the fence to gauge the initial results of RERA. This consolidation and new initiatives will surely flush out all bad constituents from the real estate market and it is expected to be a more transparent, promising and reliable market for foreign as well as domestic investors.