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Crystal Ball Gazing For The Real Estate Shows Sustained Joys For The Happy New Year!
However, it is the other concurrent tail winds that will act as boosters to sustain the long term all round health of the real estate sector.
TRENDS IN REAL ESTATE SECTOR FOR 2017 & BEYOND
The demonetization initiative by the Central government means further delays in ongoing real estate projects due to the massive cash crunch- but it also paves the way for a cleaner and more transparent real estate industry in the times to come. Developers will now look for alternative funding arrangements while end-users or investors will wait for more certainty before making any move. This should logically delay the projects at the very least. Thus in the short-term the sudden ban has resulted in a situation of limited or no cash in the market to be parked in real estate assets- leading to an abrupt fall in housing demand across all budget categories in the short term. Money has become dearer, leading to cautious spending and minimal transactions.
Liquidity has been severely impacted and this would result in a deflation with limited sales over the next three months. In short, the move has taken the real estate sector by a storm, and it would take time for all stakeholders in the sector – brokers, buyers, owners and developers - to assess its repercussions on their businesses and decisions. In the short term, buyers and sellers in the middle of transactions might be impacted as cash component would be involved in such deals.
As a Mid-term outlook however, there would be reduced inflation, better home ownership appetite, improved rental landscape with limited money floating in the economy, the inflation rates are expected to fall in the next 2-3 quarters. This, coupled with key policy developments such as speculative repo rate cuts by the Reserve Bank of India (RBI), could mean a better home ownership appetite. With the gap between circle rates and market rates bridging, owners would reduce ‘ask’ prices, impacting the average housing prices across cities. Resale properties would, thus, become cheaper and this could pressurize the primary market, as well.
Both commercial and residential markets could see rentals going north by 10-20 percent.
The Long-term impact would ensure that transparency, revived trust combine to enhance capital inflows in the realty sector the real estate sector is expected to get cleansed of its ailments in the due course of time owing to the elimination of black money clubbed with multiple regulatory changes such as the Goods and Services Tax Act, Real Estate (Regulation and Development) Act and amendment of the Benami Transactions (Prohibition) Act. Subsequently, project approvals will be quicker, resulting in a substantial reduction in the total cost of construction, thereby, the ‘per unit’ cost. Fair pricing would mean a revived demand for new projects in the market. Demonetization could also mean fresh sources of funding for developers to complete their projects. Developers will be forced to clean up their balance sheets so that they can avail funding from legitimate sources, however, this may come at extremely high costs from the Non-banking financial companies (NBFC) segment. Investments from private equity firms would usher positive sentiment across the market, helping developers to source funding and strengthen end-user demand.
The real estate sector could witness a major revolution with cash transactions getting eliminated and a major share of trades going online with the penetration of alternative forms of payment such as E-wallets, apps and plastic money. To sum it up, the demonetization of old currency has ushered a new era for the real estate industry in India that would be transparent, corruption-free, organized and veracious
Apart from these positive effects of demonetization there are several other factors contributing to the groundswell of growth in the sector. Today, World sees India as a platform of investment and it appears as an island for property and business. Globally, India has been positioned as investment destination improving India’s trade and economic growth has increased by 7.4% in the financial year. Real estate sector have also opened the doors to foreign investors.
Some other factors are creating an exponential growth pattern while laying the foundation for years of explosive boom in the sector. Some major drivers that are influencing the emerging economies are urbanization, young population, manufacturing and service sector, the great migration to the cities, growing nuclear families and swelling middle class are creating a desperate need for more urban real estate.
There are many trends have real time and long term significance.
CO- WORKING SPACES FINDING FAVOR:
Co- working spaces are popping up across India and with the ecosystem startup and demand for office space has improved in last few years. This co- working spaces are gaining popularity due to the increasing no. of freelance, office communities etc. The trend of start-ups buying and leasing real estate is catching up in India. These spaces offer cheaper rentals and flexible working options with affordable prices. There are two types of investments one is Equity investments in which each investor share some portion of rental income and the second is Debt investments in which investing in a mortgage loan associated with a specific property.
REAL ESTATE CROWD FUNDING
Crowd funding beginning to take hold: It involves the pooling of funds by number of investors in real estate project. Real estate crowd funding has several advantages such as it has increased transparency about the investment information and it also allows investors to benefit from certain tax breaks and depreciation. It helps innovators and inventors raise money for their products launch. With the increase in digitalization and transparency good returns are expected in the nascent stages.
TRANSPARENCY TO INCREASE AND ATTRACT MORE FUNDING:
According to JLL’s Global Real Estate Transparency Index 2016, Real Estate markets have increased the level of transparency that has made overall improvement in real estate. The growth in capital allocations has shown further improvements in real estate transparency. Also, social media has played a major role in this process.
RETAILERS FOR OFFICE- RETAIL COMPLEXES:
Earlier, retailers got blocked because of the lack of quality retail space. Retail categories include telecom services, leather bags, fitness centers, salons and eyewear manufactures are all looking at office retail complexes. Retail services are benefited by their location, if they are located close to or within business districts. The retailers are getting dual advantage as in comparison of premium spaces by paying lower rents. Developers are much open now to experiment this mixed- use format.
TECHNOLOGY IS TRANSFORMING REAL ESTATE REQUIREMENTS:
Technology has brought many changes in all areas. It is transforming real estate market. It has acted as a catalyst and has pushed viable options accelerating real estate market, especially in urban centers.
Technology has enabled transaction platform by launching square connect mobile app for real estate brokers and financial agents. It is the first mobile app for real estate which had pre-rolled 10,000+ real estate workers. Tech- enabled workplaces are more in demand and the change in infrastructures and the changing trends will surely reshape the Indian Real Estate Industry.
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