Major trends in India’s residential real estate secure hope for sustaining growth

Owing to a slew of measures initiated by the Centre, India’s real estate that was under a slump has been revived. Jagmohan Garg, a leading Delhi-based real estate tycoon, highlights that the move of interest subvention on affordable housing, coupled with the steps to stamp out black money, will entail a radical change in the realty segment. He believes that it will be effective in increasing the end-user demand for residential real estate in the country’s top-8 cities.

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As a matter of fact, there has been a 6% increase in the residential sales across these cities on a sequential basis. This has resulted in the total growth of 28% post-demonetisation last year. This is despite the aftermath of Real Estate (Regulation & Development) Act, 2016, and the Goods & Services Tax (GST). Jagmohan Garg emphasizes that the prevailing trends indicate a significant increase in the global capital flow into the Indian real estate. With robust changes in the regulatory framework and increased transparency, the country has emerged as an attractive option for global as well as Indian investors.
According to a recent report by Knight Frank India, the residential sales, led by affordable housing, have increased and purged the woes of demonetization. “While sales across top eight cities during the first half ended June are down 11% on-year, they have risen by the same proportion when compared with the July-December period that was marked by the demonetisation shock”, Knight Frank India said in its report.
Liases Foras, India’s leading independent, non-brokerage real estate research, property research and data analytics firm, highlights that the Mumbai Metropolitan Region (MMR) constituted 24% of the overall sales in Tier I cities, recording the highest number of sales at 15,824 units −this is the highest sales figure the region has clocked in the past seven years. It is estimated to be the third best performance of the region ever, in terms of sales after June 2009 when it had registered 21,000 units, and September 2009 when it saw 17,000 units being sold.
“Post-Lehman crisis, market had corrected almost over 30% and had adjusted itself to see more affordable home launches. Similar feat is being repeated, albeit this time the adjustment is more through time correction as the prices have remained stagnant for the last three years. In addition to this, we are again seeing good amount of affordable home launches spurred by the government initiatives,” said Pankaj Kapoor, Managing Director of Liases Foras Real Estate Rating & Research.

Jagmohan Garg from Delhi states that the affordable housing segment was accorded infrastructure status by government in the Union Budget 2017. Furthermore, the Pradhan Mantri Awas Yojna provided interest subvention of 3% and 4% for loans of up to Rs 12 lakh and Rs 9 lakh, respectively. HDFC, one of the largest mortgage lenders in India, saw Individual loan disbursements growing 21% during the quarter ending June. What stood as a testimony of the rising prominence of affordable housing demand was the average size of loans, amounting to Rs 26.3 lakh.
As per Keki Mistry, the Vice Chairman & CEO of HDFC, “Post-demonetisation, the individual disbursement growth trajectory began normalizing during the first quarter ending March. Given that interest rates are lower and property prices have not moved up for long, homebuyers are showing keen interest in buying houses on the back of incentives provided by the government.” A similar increase in loan disbursements was witnessed by Mortgage lender Indiabulls Housing Finance.

Certainly, the robust changes initiated by the government are likely to entail an upward trajectory in the residential real estate sector.