Hope rests eternal
Despite early optimism, weak consumer sentiment in 2018 will limit the revival of the home sector and is likely to put developers under more stress

Everyone wants to wish good, especially at the beginning of the New Year. Indian realty players are no exception and they expect a revival of home sector in 2018.

However, most real estate sector insiders say, the calendar year won’t be different from the year that went by, 2017.

A weak consumer sentiment in 2018 will limit the revival of the home sector and is likely to put developers under more stress. A possible lacklustre Union budget 2018-19 for real estate sector, a probable hardening of interest rates and restricted new launches are going to be the trends expected in the home market during this calendar, says Anuj Puri, chairman, ANAROCK Property Consultants.

Says Shubika Bilkha, business head at The Real Estate Management Institute (REMI), “the trend of limited new launches and disposing the excess inventory will continue through the course of 2018, where a marginal sales recovery is expected in the residential market.”

Ashish Puravankara, managing director of Bangalore-based Puravankara Limited, however, is quite upbeat about the home market this year.

The glimpses of positive buyer sentiment have put the real estate sector on its road to recovery, he says.

Also, with several government initiatives to boost affordable housing, potential homebuyers today are showing an inclination towards this segment, creating a spur in the demand for this vertical, adds Puravankara.

“In a nutshell, the year 2018 brings with it the promise of progress, a zealous year ahead for the industry as a whole with multitude of employment opportunities boosting the overall economy of the nation,” he anticipates.

As per Puravankara, change is essential in every aspect of life, but at the same time evolving to adapt change always comes with its own set of challenges.

The real estate sector experienced its share of policy reforms last year with the pronouncement of the Real Estate (Regulation and Development) Act, 2016 (Rera) and GST, when the economy was just recovering from the impact of demonetisation. “These structural shifts saw the realty sector experience a temporary market bump as customers treaded with extra caution and maybe even delayed their decision of buying a new home. Post this sluggish phase, the market picked up pace with positive vigour in terms of renewed customer confidence, which lead to an increase in fresh bookings and enquiries in the latter half of the year,” he adds.

Affordable housing will bring in growth

Samantak Das, chief economist & national research director at Knight Frank India says in 2018, government incentive-backed affordable housing trend will continue to flourish in the peripheral markets.

However, smaller ticket size house units, made possible by reducing the unit area (apartment configuration) of residential units, will redefine affordability even in city areas where prices are considered high. 

Dharmesh Jain, CMD of Nirmal Lifestyle anticipates 2018 to be a positive year for affordable housing. A rise in middle-income housing projects is predicted compared to low income housing while luxury segment would see innovation in design and development.

“While 2017 is said to be a reformist year, 2018 shall reap the benefits of these reforms. Policy changes in 2017 will bring good demand in 2018,” predicts Jain.

The government’s thrust towards urban development and ‘Housing for All’ has been visible through increased focus on luring additional capital, on increasing transparency and on boosting the real estate sector across all its key stakeholders through its policy initiatives, says Bilkha of REMI.

“With increased transparency and accountability, as well as the policy thrust towards infrastructure, urban development and affordable housing, 2018 should see renewed interest from investors and consumers alike,” he says.

Speculation will disappear in 12-18 months

Vinod Rohira, managing director and CEO, commercial real estate & REIT at K Raheja Corp says, in the medium to long term the changed regulatory framework will positively impact the positioning of the real estate sector. Rera for instance, has helped boost buyer confidence and infuse credibility to the sector.

“The next 12-18 months will see speculative supply and paper supply diminish and real supply emerge. The real supply in the short term will be far lesser than it used to be, and with the strengthening of demand we will see prices firming up because lesser real value quality residential supply will be available when the consumers want to finally buy,” he adds.

Friendly tax regime a must for recovery

Although the sector has welcomed recent policies and reforms, any plans to increase tax on property prices can force customers postpone their home buying decisions this year too, says Manju Yagnik, vice-chairperson of the Nahar Group.

“Stamp duty, luxury tax and other such charges are already increasing the rate of homes. To attract more investments and assure sustained growth of affordable housing in India, higher limit on external commercial borrowings, easy and dedicated access to institutional financing will give an advantage. Reducing some charges and penalties will also help the builders who are sitting on empty land and delaying construction. Currently, the tax is higher than the property tax levied after development of the plot, which makes it difficult for the builder to set affordable rates for flats," states Yagnik.

Homebuyers still wait for price correction

The implementation of Rera, Goods & Services Tax (GST) as well as Real Estate Investment Trusts (Reits) has brought some amount of sanity to the real estate sector that was badly hit by the demonetisation.

Customer confidence has to improve further for the industry to start ticking again and genuine homebuyers are still waiting for a price correction.

“Prospective homebuyers are still waiting for a price correction, mostly in metros and tier II cities,” say Bangalore-based couple Ramu and Smitha Vasudev, adding “We know the market has been stagnant in the last two years and builders are still not in a mood to reduce prices to make it realistic.”

“We are waiting for the buyers’ market to emerge to buy our home,” they further said.