The trends we are about to discuss are really helping the realty sector move forward at a significant pace.
A bright chance for global capital inflow into the Indian real estate sector
The United Nations Conference for Trade and Development has submitted a world Investment report which explicitly says that India ranks the 4th in increasing FDI inflows. The real estate sector saw a high level of equity investment last year. Moreover, the realty sector has attracted close to around $32 billion in private equity so far. In 2016, the global capital flow into the Indian realty sector was around $5.7 billion.
In spite of the uncertainty created by the US election and the stringent visa policies prevailing currently, the PE inflow still looks healthy this year. The country is becoming one of the best destinations to do investments. The economy has started to improve significantly in the last few months. In the JLL’s bi-annual Global Real Estate Transparency Index, the Tier-1 cities in India have climbed up to the 36th position. This is due to reasons such as improvements in structural reforms, more liberalized foreign direct investment (FDI) regime and increased transparency
Global investors around the world have started looking at India as one of the best investment destinations. The timely launch of Real Estate Investment Trust will also boost the growth of real estate in the country and thereby our economy.
Business modalities will change eventually
Last year, though many new residential projects were launched successfully, the number of units sold was really not up to the mark. The introduction of Real Estate Regulatory Act will definitely take care of the glitches that still exist in this sector in the near future. By bringing this act, most of the builders will fall in line. The system will bring a lot of transparency into the business and a decent level of accountability. Apart from every other thing, the confidence level in consumers will automatically develop.
It is not only about RERA now but the Goods and Service Tax and the Benami Property Act will also impact majorly the realty business. The effect of demonetization was not bad for developers that had the right products. It only challenged the older working ways. The developers and businessmen have now realized that they have to change the working models if they want to stay in business with successes. Market watchers have now started to develop some confidence in the Indian real estate sector which was never there before.
The residential property market, after demonetization, is the main focus of the end-users and investors. The residential demand will pick up in the end of 17. The level of sustainability will be noticed slowly by the turn of this year. The corporate giants like Tata, Birla and Mahindra etc., will acquire projects so there is a great likelihood for the funding to increase. Due to this the Real Estate Investment Trust will have a long-term impact on the developers.
Hybrid spaces to develop more than before
It is about time that people thought co-working office spaces will bring more harmony into business. In metros and tier II cities, this particular culture is starting to develop. As of now, there is still very limited supply of co-working spaces which might have to increase in number. There are many advantages of this particular arrangement in companies.*Cost-efficiency *Employee motivation and retention *Boosted productivity
By having co-working spaces, a company can develop a very good cultural blend among employees which will help improve business in the long run, in many respects.
The sun rises on affordable housing
At present, affordable housing has become the "chanting mantra" of people across the country. With the change in the government policy to develop as many affordable housing units as possible, things are changing very rapidly. By next year, there are plans to build 1 crore such houses across the country. The National Housing Banks will further support this cause by reducing interest rates and relaxing policies. Under the Pradhan Mantri Awas yojana scheme, loans are a lot easier to obtain than before and the extension of tenure of loans will help people to go for affordable housing units. The budget has also increased the allocation of PMAY from 15 thousand crores to 23,000 crore in the rural areas
The policies that have undergone change have clearly mentioned that instead of 30 sq. m. and 60 sq. m being super built-up areas, they should be carpet areas to quality for affordable housing. The demonetization of currency will undoubtedly make the land prices fall down in the next few months. In the tier II and tier III cities, the effect of demonetization has started which will make the affordable housing project a much more achievable one than before.
Office sector transformation: From REIT to complete
The first REIT listing is expected within the next few months, and the REITs are expected to attract institutional investors and small investors alike.
Smaller investors are really happy about this becausea. Indian REITs will focus on commercial spaces especially because the rental yields are higher. b. Only 20% of an Indian REIT's monies can be invested in development, which is the riskiest aspect. The remaining 80% of a REIT's assets must be invested in income-producing property.
The REIT potential in India is huge, A huge amount of office spaces is being REIT-compliant. Even if 50% of this space is listed in the next few years, we are looking at a total REIT listing worth $18.5 billion. Moreover, India's stock of Grade A commercial assets is increasing, with REITs acting as a sure-fire growth catalyst.
More industry consolidation on the cards
Currently, lack of financial prudence is the main reason for the developers to go slow on their performance. The overcrowded real estate sector will have to face challenges in future and tackle them carefully to regain the confidence they have already lost. There will happen more numbers of joint ventures between land owners and developers to construct buildings. This will have to be carried out with extreme prudence to boost the real estate business to the brim of success. Allowing foreign funds to get into the business will certainly improve the conditions of businesses across the country. That again depends on how much equity gets inserted into the sector.
Some investors will take a plunge into the market now. The impact of demonetization will be that a lot of working class will come forward to invest money on various projects. This will slowly increase over time. At the same time, the smaller players have to be careful about introducing projects and schemes to attain sustained development