Indian Real Estate Sector Witnessed Slow Year 2019 but Hopes are High for 2020: ANAROCK Report
Indian Real Estate market witnessed consolidation in many regions but overall, 2019 was a mixed year for Indian real estate sector. Many developers were careful about launching new projects. Registrations under RERA were higher in 2019 and developers are now comfortable with RERA rules. However, the end user demand still remained low in year 2019. With government's steps to help real estate sector and economy in general, expectations from 2020 are high.
A report on Indian real estate sector and expectations from 2020 by ANAROCK Property Consultants follows...
Indian real estate was devoid of any appreciable forward momentum in 2019. Dwindling consumption, lacklustre investment appetite and the global slowdown overshadowed all possibilities for growth. India’s GDP growth rate stuttered and sunk to a six-year low of 4.5% in Q2 FY20.
The real estate sector's performance - a reliable barometer of India's overall economic health - painfully reflected the macro-economic state of affairs. The liquidity crisis did not relent and dented any ‘real’ growth during the year.
Anuj Puri, Chairman – ANAROCK Property Consultants says, “Multiple developers fell off the grid while others still struggle to stay viable. However, strong players with healthy balance sheets - in many cases diversified beyond real estate - sailed through 2019 and recorded decent housing sales and revenue growth. Towards the end of 2019, more than 72% (approx. USD 47 bn or nearly INR 3.3 lakh crore) of the total loans advanced to Grade A builders (USD 65 bn) are safe and stress-free. Grade B and C developers collectively accounted for just USD 28 bn of the total loan advances.”
Commercial office real estate flourished and remained the top-ranking real estate asset class. Residential continued to struggle under the funding crunch and slow annual sales growth. Other asset classes like co-working, logistics & warehousing, co-living and student housing gained traction in 2019, attracting slow but steady investments (collectively USD 210 mn).
Government's Housing Interventions - Amidst the gloom, the government gave real estate major shots in the arm in the first leg of its second term in office. There were concerted attempts to revive the economy while simultaneously addressing challenges in the struggling automobile, real estate and retail industries. Most notable among these:
The creation of an alternative investment fund of INR 25,000 Crore for last-mile funding of stalled housing projects
Deep cuts in corporate taxes.
Further relaxation in FDI norms for single-brand retail and expansion of the definition of mandatory 30% domestic sourcing norms
While these interventions have not shown any significant impact so far, they have boosted the confidence of India Inc. and the affected sectors.
“2019 saw RERA gain firmer ground with over 40% growth in project registrations,” says Anuj Puri. “To make under-construction projects more attractive, the government slashed GST rates to 5% - unfortunately, without ITC benefit. The government also took a major step towards safeguarding homebuyers’ interests by banning the once-popular (but often misleading) subvention schemes. RBI reduced the repo rates by a significant 135 bps all through 2019 and mandated commercial banks to link home loan rates to it.”
All in all, in terms of policy interventions in 2019, real estate drew considerable fire but failed to display appreciable growth. The seeds sown in 2019 are expected to bear visible fruit in 2020.