Is Real Estate Showing Signs of Green Shoots?

Is the worst over for the Indian real estate sector? If the readings of the survey conducted by Liases Foras Real Estate Ratings & Research, a property research firm, are to be believed the answer is 'yes'. Further, global investors flocking to the Indian realty market, builders offering discounts and customised payment plans to ignite sales of ready-to-move homes, and NAREDCO's launch of Housingforall.com to revive sentiment and boost sales lend credence to the survey findings. Data for Q3FY'20 from top 35 cities show a 5% quarter-on-quarter increase in home sales and a 3% year-on-year increase. This marked improvement vis-a-vis Q2FY'20, which had witnessed a drop in sales figure, shows that Indian home buyers are returning to the property market.

According to Pankaj Kapoor, MD, Liases Foras Real Estate Ratings & Research, 2018-19 had seen a marginal decline in both sales and launches. "The downward slide has now been arrested and the trend is reflecting an upward movement. Time correction has improved homebuyers’ affordability. And with inquiry levels going up, builders have garnered confidence to launch more projects,” he said. The dominance of affordable housing in sales continued in the third quarter, with over 58% of the purchases coming from people buying apartments at below Rs 50 lakh, the survey report stated, with about 66% of of the launches happened in this segment.

Bengaluru, Hyderabad and Mumbai Metropolitan Region (MMR) contributed to growth in the quarter, with Chennai and Kolkata posting a sharp fall in sales. Delhi-NCR eked out a 1% increase in sales Q-o-Q, though annual sales fell 10%. Sales in MMR rose 5% Q-o-Q and dipped 1% Y-o-Y, though outer MMR posted a sharp 10% rise in annual sales. Sales in Chennai and Kolkata fell, with the southern city posting a 10% decline Q-o-Q and a 20% annual fall. Sales in Kolkata rose 2% annually, but dipped 5% Q-o-Q.

Looking to tap opportunities in the Indian realty market, many Japanese investors and developers are looking to up their investments. This is a win-win situation for both the investor as well as the developers. Investors are eyeing the returns while developers are looking at long-term money. According to a news report in a pink paper, some of the Japanese funds and companies looking to invest or up its investments include Mitsui Fudson, Mitsubushi Corporation, Sumitomo Corporation and Genkai Capital. While most of the capital is for big ticket opportunities in the commercial real estate, residential investment is also being selectively evaluated. “Japanese money is a long term capital of 8-12 years. They have the risk appetite and is mostly looking at equity transaction across assets classed in real estate,” said, Shobhit Agarwal, MD & CEO – ANAROCK Capital. Agarwal added that Japanese funds will play a significant role in providing the long-term solutions Indian developers now need. It's not only the Japanese who are looking at the Indian realty market. Recently, US banking giant Goldman Sachs has invested Rs 610 crore in Gurgaon-based realty developer Vatika Group in a part equity part debt deal. "In fact, 2020 promises to be an action-packed year for Indian real estate funding,” said Agarwal.

Read More: NAREDCO Lauches HousingForAll.Com

Builders on their part are offering discounts and customised payment plans to ignite sales of ready-to-move homes, aiming to reduce inventory, bring down holding costs and generate cash flows. For instance, Gurgaon-based M3M Group offered 10% down payment and no EMI for a year, which converted to sales. Further, in a bid to revive buyer sentiment and boost sales, National Real Estate Development Council, NAREDCO, recently launched a web portal (HousingForAll.Com) displaying ready-to-move properties with occupation certificates. Developers too are of the opinion that selling ready homes will revive customer confidence. According to Proptiger report, with buyers showing interest in ready homes, inventory levels declined 12% during the December quarter from a year ago. From 883,000 unsold housing units at the end of the same period last year, unsold stock fell to 775,000 in Q3FY'20. Mumbai and Pune together contribute 57% of this unsold stock. Half of the units in this stock are affordable homes, priced below Rs 45 lakh, the report stated.

These are certainly interesting times for the Indian real estate sector and players are making the most of it.

 

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