Surat, December 14, 2017
New policy, reforms, and greater regulatory controls in real estate made year 2017 memorable for end users in India.
Reforms spiked unaccounted and inflated rates transactions that denied affordable housing to average citizens. Establishing RERA (Real Estate Regulation and Development Act, 2016) ensured financial transparency and increased prospects of buying apartment for real owners.
Reforms eliminated anonymous property transactions and ownership by amendments to the Benami Properties Act. This booted out gray market businesses that artificially hiked property prices.
The government gave impetus to its ‘Housing for All by 2022’ mission in 2017 by granting infrastructure status to affordable housing.
Houses classified under Middle Income Group (MIG) received policy tweaks to cover a larger buyer base. It helped developers offload their budget homes inventory.
The impacts of demonetization on November 8, 2016, RERA and Goods and Services Tax (GST) affected launches of new housing projects in 2017.
ANAROCK research shows, just 94,000 new units in the top seven Indian cities between Q1-Q3 2017, a drop of more than 50% from the same period in 2016.
The last quarter of 2017 recovered lost ground. In the first two months of Q4, around 18,000 units entered the market, around 90% of the new launches in Q3 2017.
With restricted new launches and businesses that stayed away gradually returned to the market because of the reforms.
In the first three quarters of 2017 developers sold 160,000 units. There was 30 per cent decline in sales compared to Q1-Q3 2016. Unit sales have exceeded new launches for the consecutive six quarters, and the trend continues in Q4 2017 as well.
Unsold inventory decreased by 22%, 18%, and 16% in Hyderabad, Chennai, and Bengaluru respectively between Q3 2016 and Q3 2017.
National Capital Region (NCR) and Mumbai Metropolitan Region (MMR), which account for around 55% of total unsold units across top seven cities as of Q3 2017, witnessed a 6% decline in unsold units between Q3 2016 and Q3 2017.
In the post-RERA era, developers will focus on executing under-construction projects within the stipulated period. New launches are likely to be restricted, and unsold units will decline further in 2018.
With changing buyer preferences and skyrocketing prices, developers have been compelled to construct compact homes. ANA ROCK research shows the average size of new units launched in 2017 shrunk significantly over the previous year, across the top seven Indian cities. NCR witnessed the highest reduction of 21%, followed by 15% reduction in Pune, Kolkata and Hyderabad, and 12% in MMR.
In conclusion, real estate developers are unlikely to forget 2017. It is like a bad dream come true, and looks forward to better business in 2018, which will be a year of market recovery defined by restricted new launches, gradually improving sales and declining unsold units.
A notable phenomenon in 2018 will be a large-scale consolidation of developers and brokers, and distressed assets changing hands.
We may not see a scintillating residential market recovery in 2018, but it is certain that whatever recovery and growth we see from here onward will be sustainable and backed by stronger market fundamentals than ever before. The days of speculative peaks and troughs are safely behind us.