The Year Gone By- A Mixed Bag for Indian Realty
The year gone by has been a mixed bag for Indian Real Estate. There have been a few hits as well as a few misses. In general, moderation in sentiments prevailed in the market, which was further aggravated by an overall slowdown in the Indian economy. In the last quarter, the GDP growth slowed down to 4.5%, one of the lowest in recent times. The economic growth has been decelerating due to slowdown in the global economy, moderation in private investments, & softening of domestic consumption.
A weaker GDP growth has also translated into a slowdown in the Real Estate sector that contributes to around 8% of the overall economy in India. It is estimated that in major cities of India alone, there are over 175,000 unsold housing units worth around INR 1,800 billion. A large inventory overhang coupled with an overall slowdown in the economy has not been very beneficial for the realty sector as well.
However, at the same time, we cannot miss out on some of the positives that the passing by year has seen. With the implementation of RERA, Indian Real Estate has entered an era of unprecedented transparency & structure. Policy implementation by the government has ensured punitive actions against unscrupulous developers, recommenced work in many stalled projects & brought a lot of transparency in how Real Estate transactions are concluded. Bigger developers with deeper pockets have been acquiring smaller ones in a strategic fashion, thereby harmonizing the industry & bringing in more discipline. The year also witnessed an upbeat commercial sector, as there is ample appetite for Grade-A quality spaces.
Although home prices have been stable without much of an upward movement, 2019 also did not notice any major dip in transaction velocity. Due to viable prices, homebuyers (end-users) are continuing to dovetail the industry in a positive direction. Most of the buyers know that this is the best time to buy a home as prices might increase in the times to come. The year has also seen the growing influence of the NRI community as they are increasingly becoming a concurrent theme in Indian Residential markets.
2019 was also marked by some prudent initiatives by the Indian government in the form of recapitalization of NBFCs, fiscal stimulus to complete stalled projects, policy support for affordable housing, iterations of a repo rate cut to support liquidity & much more. In this regard, despite challenges, 2019 is a noteworthy year that will set the stage for a stronger 2020 to come. In the following year, we can expect more consistent growth stemmed by healthier fundamentals, surge in demand & increased structure.