Impact of budget 2019 on real estate industry

At the moment, India’s economy is one of the fastest growing economies in the world. The real estate market, though having its ups and downs, is thriving in the current economy. Real estate investors, manufacturers and other international investors have turned their eye on this country. The real estate industry has likely got to keep up with and adapt to the rapidly changing regulatory environment.

Demonetization, RERA, GST implementation, and the new ICBC guidelines have all added to the challenges that were faced by this industry. While the positive impact of the regulatory changes has been acknowledged in the medium to long term, the industry had to cope with the short term challenges. The major trend of the real estate industry in 2018 was:

­With the enactment of RERA Act, simultaneous launches of projects without any surety of completion has reduced down to a trickle. Now all projects have been fixed a deadline to be completed within. The ­market was severely affected by the GST impact on under construction residential sales. Buyers are now preferring to wait for the project to be completed before buying the unit to save on the GST cost. ­Developers have started to focus on the commercial (office) development as they believe the scope and potential for this is far better in the upcoming years. ­In the urgency to sell off existing projects quickly, there has been an increase in the amount of available ready to move ­in houses. Government’s dream of “Housing for all” by 2022 has received the much-needed push. ­Impact of the changing policies has led to the increase in FDI inflows and foreign investors finding the real estate market more reliable. India has been ranked fourth in terms of Foreign Direct Investment (FDI) inflows in the World Investment Report 2016­ 17 by the United Nations Conference for trade and development.

The year 2019 should see a deepening of the preceding trends along with the general elections which will be a big event by itself.

­Bigger developers will get more opportunities to pick uplands, stalled projects, and even assets as most small developers will fail to deliver theirs over leveraged projects. They will start liquidating their assets off to keep meeting their financial obligations to lenders and their commitments to customers.

­With India being ranked fourth in terms of FDI inflows according to the World Investment Report, it clearly indicates that the interest of foreign investors is growing rapidly. Increase in growth of sales in the new reform is expected as it paves way for more transparency in the market.

­Developers will focus more on affordable housing, with residential units in the price range of INR 1.5 – 3 million. Affordable housing will be available to more people. The better-placed developer will expect much higher off takes. An upcoming segment that will hold focus in this year is student housing and senior living. The senior population in the country is probably expected to touch 240 million by 2050 from the already existing 98 million in the country, the senior living sector is most likely to see increased activity.

The real estate industry of India is growing with a consistent but slow pace. Since the slowdown in 2016 because of demonetization, the industry has come a long way and the growing economy is rising to the demands. Even with a rise in demand in most cities, the year on year price has remained low. The year 2019 would be an exciting and interesting one for the real estate industry although the pace of the change will be rather frenetic.