National Insite Report Jul-Sep 2018

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Market Movers

Government acknowledges homebuyers as creditors

Relieving the distraught homebuyers in India, the Cabinet approved the bill identifying them as financial creditors in a real estate project. The move is instrumental in protecting their rights in the case of a developer going insolvent under the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018.

RBI hikes Repo Rate by 0.25 bps

The apex bank of India hiked the Repo Rate by 0.25 basis points for the second time in a row in 2018, bringing it to 6.50 percent. The move impeded home buying sentiment as it translates into heavier EMIs for home loan borrowers. The Repo Rate was, however, kept unchanged in the October cycle.

Centre bans construction due to poor waste management

The delay in drafting a solid waste management policy irked the Government and led the Supreme Court to ban construction activities across Maharashtra, Madhya Pradesh and Uttarakhand. The decision brought the real estate activities to a halt and impacted infrastructure projects worth Rs 4.5 lakh crore.

Government initiates key infrastructure projects

In addition to approving Metro Rail projects in tier II cities such as Indore, Kanpur, Bhopal, Agra, and Meerut, the Centre sanctioned Rs 200 crore for augmenting the road network across Gujarat, Maharashtra, Rajasthan, Madhya Pradesh, and Diu.

Centre initiates faster resolution of insolvency cases

Taking into account the 2,500 unresolved insolvency cases involving developers with the National Company Law Tribunal (NCLT), the Centre decided to set up eight special courts in Mumbai, Delhi, Chennai, Kolkata and Hyderabad. The courts will specifically deal with insolvency cases and expedite the resolution process.

99acres Outlook

Housing market in India has finally come to terms with the multiple economic and regulatory reforms announced in the last two years. Realty stakeholders, particularly the buyers, have gained clarity over RERA and GST. The former, in fact, helped the homebuyer community firm their trust in the real estate industry, which struggled long due to delayed project deliveries, insolvency cases and fly-by-night players in the market. From the beginning of FY 2018-19, the market started showing signs of improvement with an increase in the number of enquiries and fresh supply by the developer community. The quarter ending September 2018 finally saw demand translating into realty sales.

A significant reduction in the housing inventory pile up across metros from eight lakh units last year to 4.4 lakh units also hints at a realty revival in the offing. While Delhi NCR and Mumbai led the pack with the highest share of unsold inventory of close to 1.5 lakh and 80,000 units, respectively, a fifty percent decrease in these numbers spelled good news for the industry.

In the meanwhile, the rental landscape across cities tread unwaveringly with average weighted prices going up by 3-5 percent, YoY. In Delhi NCR, rental market alone constituted nearly 70 percent of the realty transactions that happened in the last one year. The reduction of this share to 60 percent this year hints at the reviving capital market with the rental landscape still overpowering the former.

Increased regulation under RERA resulted in the consolidation of smaller developers, whereas, the established players resumed launching new projects at a controlled pace. The ensuing festive quarter is looked at as the deciding period for the developers. The response of the buyers in Oct-Dec 2018 will pave the way for newer projects in the next calendar year. Overall, India’s residential realty sector, both capital and rental, well-stood at the helm of recovery.

INDIAN REAL ESTATE

The Indian realty sector was poised for growth in Jul-Sep 2018 with the dust around the multiple policy reforms such as RERA and GST settling down. The registration of almost 31,500 projects across the country under RERA spelled good news, however, delayed completion of almost 5.6 lakh units, amounting to Rs 4.10 lakh crore, posed a challenge. The under-construction segment continued to lose its sheen as the limited potential buyer base preferred ready or near-ready homes.

KEY HIGHLIGHTS

Property sales across top metro cities in India recorded marginal improvement in Jul-Sep 2018 as against the previous quarter. Affordable housing clusters, transit corridors and economic hubs continued to gain the maximum buyer traction. Noida, for instance, remained a popular choice amongst homebuyers in Delhi NCR due to its impeccable connectivity and competitive housing inventory. Similarly, Bannerghatta Road and Kanakapura Road in South Bangalore continued being the sought-after belts due to the expanding metro network and their proximity to the IT hub – Electronic City.

New launches were put at a back burner as cities swarmed with unsold inventory. Grade A developers took the lead in launching new projects as acquiring a RERA number became a challenge for small-scale developers. In Bangalore, around 6,000 new units were added, with 1,000 in Electronic City alone; whereas in Hyderabad, a total of 1,500 new units were launched this quarter. Kolkata reported a drop in the number of new unit launches over the last two quarters.

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Delayed construction timelines continued to mar buyer sentiment towards under-construction projects, especially in Delhi NCR and Mumbai Metropolitan Region (MMR), which together accounted for over four lakh units running behind schedule pegged at Rs 3.6 lakh crore. In Pune, almost 95,000 units costing Rs 57,000 crore were reportedly delayed. Chennai had over 10,000 housing units worth Rs 6,500 crore, launched before 2013, running behind delivery timeline.

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New constructions worth Rs 70,000 crore in Ahmedabad witnessed a jolt owing to delays in acquiring online approvals. Kolkata, too, saw new launches coming to a grinding halt due to the looming ambiguity over the implementation of Housing Industry Regulatory Authority (HIRA) – West Bengal’s version of RERA. With the Centre urging the State government to adopt RERA over HIRA, the confusion is expected to continue in the ensuing quarters.

All cities barring Hyderabad witnessed a shortfall in supply of affordable homes as the government managed to complete only 15 percent of the planned low-cost homes under PMAY-Urban. Of the total 54.95 lakh approved homes, around 8.55 lakh had been constructed and nearly 30.4 lakh units were under-construction by August 2018. Despite the shortfall, the 1.6 lakh homes which are vacant across the country are a testimony to the paradoxical situation that the Indian realty faces.

The rental landscape continued to tread the growth charts this quarter, too. While Delhi NCR, Chennai, Kolkata and Ahmedabad witnessed the average rental values increasing by three percent, YoY, the economic centre of Mumbai and the IT-driven cities such as Bangalore, Pune and Hyderabad saw rentals climbing up by 4-5 percent, YoY. Oversupply of rental housing stock restricted rental price growth in Delhi NCR.

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