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Trending 2019

Saturday, January 05, 2019
By Harsha Vardhan – Director, Kumari Builders and Developers

Indian real estate industry is going through a major transformation in the last couple of years. Some of the decision and new policies of the Indian government have largely impacted the real estate sector, albeit in a positive or negative way. The new policiess such as RERA, REIT’s and Demonetization in 2016, followed by GST and FDI 2017 made a huge impact on the industry. All these regulations are reshaping the real estate sector.

Those reforms significantly contributed to the growth of the industry for the last few quarters and possibly, it will continue to help the industry to grow in the coming years. The higher growth has been expected for the next fiscal year 2018-2019 by looking at the positive outcomes of the reforms. It’s also attracted lots of foreign investors to invest in the sector.

The following are positive trends that can be expected in the next fiscal years.

Increase in affordable and Mid segment housing demand
Affordable housing has become the faster-growing segment in the Indian realty sector and has witnessed a maximum number of launches within the rage of 40 lakhs in 2017 and 2018. The affordable housing has been boosted by the implementation of Pradhan Mantri Awas Yojana (PMAY) which has brought back the confidence among the buyers. Mid-segment accounted for 45 percentage of the total launches, with the affordable segment close on its heels with 42 percentage shares.

Developers are showing lots of interests in affordable and mid-segment housing which attracts customers more than any other housing segments. As per ANAROCK data, the new launches supply across top 7 cities is estimated to be 1,93,600 units by the end of 2018 which is an increase of 32% compared to 2017 which stood at 1,46,850 units.

The affordable housing is experiencing unprecedented growth due to the private partnership, increased connectivity, and infrastructure, however, the market extensions into suburbs are the major impetus driving force. It is also well complemented by refinancing by NHB, interest subsidy through PMAY largely contributingto the growth of the affordable housing segment.

 Mid-segment has also been seeing traction for the last couple of years. Mid-segments come with compact homes with premium villas in emerging locations. During the first half, this segment has witnessed sale up to 64,000 units in comparison to 96,000 units sold in 2017 and expected to pick up in this fiscal year. Mumbai and Bangalore lead in the segment compared to NCR, Chennai, Pune, and Hyderabad.

Commercial – Emergence of Start-ups & Coworking
Commercial space is going to be another key driver of demand in 2019 which will be led by manufacturing, Banking, financial services and insurance (BFSI) and others. But, the emergence of Start-ups and growth of IT sector intensifies the demand for the office's spaces, in particular, co-working spaces across India. According to the JLL report, 39% of office absorption held by domestic IT giants like Infosys, TCS, and multinationals such as Accenture, Cognizant and IBM continue to expand across the cities. However, most of the companies prefer flexi space business model and has become a need of the hour for them. Because it suits their business model and their budget as well. In 2018, the co-working space has accounted for 9% of the total absorption in office markets compared to 5% for CY 2017. The number is expected to grow in the coming years since most of the companies are opting this model.

The office market absorption is expected to surpass 37 million square feet by the end of 2019 as compared to 33 million square feet in 2018, according to the JLL report.

The retail malls are also expected to grow alongside office space. As many as 32 new malls spanning nearly 13.5 square feet area are slated to be operational in 2019 across major cities. Bangalore and NCR are expected to see 7 operational malls each, followed by 5 in Hyderabad,3 in MMR and 1 in Chennai, according to the ANAROCK data. The growth of the office space and mall space are co-existential.

Warehousing-E-commerce and Logistics  
The rapid growth of e-commerce and logistics companies are largely helping the warehouse industry to grow in India. The industry also set to witness investments close to 50,000 crores for the creation of the warehouse facilities across the country. Two prominent changes that created a significant growth in warehousing are the implementation of GST and creating unified taxation which attracted the domestic and international investor to invest in the warehousing sector.

The overall warehouse absorption has gone up by almost 40% since 2016 and is expected to see a substantial increase in the supply of warehouse stock.

Unmet demand -Student housing and Senior living
The sector is still at a nascent stage and is yet tomeet its demands. The demand for student housing is high in India. They are approximately 34million students in higher education and most of the universities are able to accommodate just about 18 to 20 percentage. This shortage led the students to end up in the disorganized PG sector with no uniform standard of rent, facilities or safety. Because of the uncertainty of the PG sector, the parents are ready to risk spending more on housing with proper facilities. Student housing has the potential to yield more than 12 % returns and the sector is expected to grow at a 38% CAGR until 2020, to INR,2400 crore. A senior living will also see increased activity, as the estimated senior population is 98 million in India and expected to touch 240 million by 2050.

Suburbs are the future
According to the recent trends, the builders are focusing on suburban areas due to the large availability of land at a relatively cheaper price, increase in urban population and are more equipped to build home with high facilities. Moreover, Non-IT firms, e-commerce companies are gradually moving to suburbs for quality space and it has been well supported by the government plans to develop suburban areas.

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