The affordable and mid-income housing segments are expected to keep the real estate sector buoyant in 2019 with developers and institutional funds eyeing opportunities that can offer exciting returns.
Evolving market dynamics, increasing consumer appetite for smart homes, a burgeoning mid-segment and the government’s thrust on regulatory reforms and incentives were the highlights of the real estate market in the year 2018.
Rising role of technology
Noteworthy among the trends was the rise of a new category of ‘smart home’ buyers in India. According to industry estimates, the average age of potential homebuyers is dropping and will be about 29 years by 2022, compared to 38 years in 2007-08. These potential young homebuyers constitute about 46 percent of India’s total workforce and they are looking at homes that come with comfort, convenience and sustainability, apart from smart solutions.
Developers see a huge business opportunity when they add technology to homes. For instance, leading builders have launched residential projects based on the concept of smart homes with technology partners like Amazon and Google. These voice-enabled smart homes have caught the fancy of millennials in a big way, as they carry out tasks based on voice commands.
Another technology trend that attracted customers was the introduction of the internet platform to enable potential home buyers to book their apartments online. The use of artificial intelligence ensures low human intervention during the entire process except during the time of signing the final agreement. These online portals give customers real-time insights along with a help guide.
There is a growing interest in the luxury segment from two groups. One is the rising number of high net-worth individuals (HNIs) who have high aspirations of a premium lifestyle and the second is the Indian diaspora who are showing a greater than ever before interest in the Indian real estate sector.
The concept of luxury living has transformed over the years with customers demanding a holistic experience. They are also selective about the legacy of brands, apart from construction quality, on-time delivery and high levels of service. Luxury home buyers are different from smart home buyers and prefer the touch-and-feel of the product and opt for ready-to-move-in luxury homes. They also wish to belong to a certain community of like-minded individuals.
The real estate sector in the country greatly benefitted from this sector last year and the trend is likely to continue in the coming quarters.
On the policy front too, the government boosted customer confidence by aggressively pushing for transparency through key reformatory actions including demonetisation, Goods and Services Tax (GST) and Real Estate (Regulation and Development) Act (RERA). The government’s ‘Housing for All’ scheme by 2022 and the granting of infrastructure status to the affordable housing sector have opened up the low- and mid-income segments like never before.
To create convenience for first-time home buyers, banks too also launched various schemes that give a financial advantage over the construction cycle of the project.
Cities that showed promise
There is a gradual bottoming-out of the Indian residential property. As per industry estimates, the number of flats sold in key cities has shown a growth in high single digits on a year-on-year basis.
In 2018, Mumbai, Pune and Bangalore saw higher sales, YoY. Sales figures from the sector indicate that the growth momentum is improving at the mid-to-high price segments. Many Bangalore-based builders are focusing on improving sales volume by offering concessions like purchase or booking incentives.
While sales volume in FY18 was negatively impacted by introduction of new regulations like GST and RERA, the demand-led volume improved during the fiscal.
Therefore, unsold inventory level in the residential segment in leading cities consistently reduced over the last few quarters, with the decline being higher in Bangalore, NCR and Pune. The unsold inventory to sales ratio has been relatively more favorable for real estate developers in Hyderabad and Bangalore. In Mumbai and NCR too, the density of inventory is thinning gradually as reflected in inventory to sales ratio.
In the current phase, the residential real estate segment is in a transformation state: from being unregulated, fragmented and inefficient to operating as a regulated, consolidated and efficient market. The key aspect of the transformation is increased market transparency with a regulator in place. A consolidation phase is in the horizon as marginal players struggle to cope up with regulations and also remain efficient and competitive.
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