Real Estate Trends which will Rule Indian Real Estate in 2018
Many things happened in 2017 in the Indian real estate segment and almost overhauled the system. The market took time to stabilize and understand its nitty-gritty. It is anticipated that the year 2018 could bring cheer to both buyers and sellers, as last years policy changes and government of India's thrust towards Affordable housing, forced developers to change their traditional way of working and respect the consumer demands in time.
We are discussing some of the major trends which can be seen in the year 2018 and have the power to shape the Indian real estate market for the better.
1) Enhanced International Reputation
As the capital flow from global markets in the Indian real estate is slowy increasing, more NRI's are finding country's real estate market as reliable one. As per the World Investment Report 2016-17, presented by the United Nations Conference for Trade and Development, has ranked India at fourth for FDI inflows. This surge has been due to improvement in the real estate regulatory framework at ground level, resulting in building an attractive investment destination for both Indian and global investors. The private equity is performing well with $ 32 million investment, last year.
2) Change in Business Models by Developers
Now the developers are renewing their old business models. In early 2016, the developers launched many projects and there was no guarantee of completion of these projects. Now, through the RERA act, a deadline is given for these projects to be completed. It forces the developers to improve their business model. To avoid any penalty, the developers will have to bring greater transparency, as well as accountability in their system, to increase consumer confidence in them. In addition, the Goods and Service Tax (GST), as well as the Benami Transaction (Prohibition) Act 2016, will have a greater impact on how developers run their businesses. The developers must bring changes in the business models to sustain in the market.
REITs will also have a significant and long-term impact on developers, with the choice of either "corporatizing" or risking “take over”, by their larger counterparts. Corporate developers such as Tata, Mahindra, Godrej, etc. will acquire more projects enabling transparent and better housing projects.
3) Rise of Hybrid Culture (Co-working Space)
More from India Inc. moving to "hybrid" spaces are causing a rise in the co-working / shared culture. In all metro cities, it facilitates the corporate culture and fully furnished work space to start-up companies and entrepreneurs with flexible working options at affordable prices. Companies with limited space requirements are renting their office space, which is giving rise to the "hybrid" space. This would help motivate employees, increasing productivity and cost-effectiveness to their income.
4) Affordable Housing
The affordable housing segment will impact on the housing sector. According to the government's plans, by 2019 more than one crore houses will be built in rural India, with support from cheaper sources of finance. The external commercial borrowings and the refinancing of housing loans by the National Housing Banks would help in the growth of the sector. The home buyers have been given the option for affordable housing, where the carpet area has been changed from 30 sq. m. to 60 sq. meters from the saleable area. It is expected that the land prices would fall in the coming few years, as there is limited availability of a high-value currency due to demonetization.
5) Industry Consolidation
There is an increase in real estate consolidations in all parts of India, due to the increase of developers, projects and lack of potential customers. This is paving way for the merger of different developers into one project. Joint developments and joint ventures will give more meaning to the real estate sector. This will lead to mergers between small and large developers, new struggling developers with strong players, also land-owners with new builders. This will attract more investors as the price earning ratio will improve for this sector.
6) Tranformation of office Sector
Transformation of the Office Sector, as the REIT will be listed, builders will easily obtain funds to make buildings. The office sector would obtain financing from private equity funds. This will attract small investors, with a minimum risk appetite. They will know that the money they are investing in, is something that is concrete and will not lose its value. Investors would also know that their money is in safe hands.
With the growing trends in the real estate sector, people are now moving to small-scale investment. For Indians real estate investment, even on a very small scale, still remains a tried and tested means to build the wealth and cash flow for an individual.