Industry and trends
5 Major Trends Driving Indian Real Estate in 2018
Those who have been eagerly waiting for property prices to increase can now breathe a sigh of relief. Just last week, the Reserve Bank of India (RBI) released its quarterly House Price Index (HPI) for Q3 2017-18 fiscal.
After several quarters, there is an uptick in housing prices across the country. Numbers reveal that housing prices went up by an average of 7.6% in the third quarter of 2017-18 as against Q3 2016-17. This was indeed interesting! After reading that, I started reading RoofandFloor's Q1 2018 report .
A look at the numbers of the first quarter of 2018 revealed that the real estate market is on a revival mode. The teething troubles of regulatory reforms that were introduced last year are now gradually subsiding. It is interesting to see how various stakeholders have adapted to the newer ways of doing business.
The data made me realise that a few patterns are emerging now that we are almost five months into this year.
Despite decreased new launch supply, homebuyers will continue to steer the wheel implying that it will be a buyers' market in 2018 as well.
New launch supply recorded a decline of nearly 29% in Q1 2018 in the three southern cities of Bangalore, Chennai, and Hyderabad in comparison to the corresponding quarter in 2017.
There's a reason why. Developers are worried about mounting unsold inventory and the impact of RERA. Developers, therefore, are concentrating more on completion of their previously launched projects rather than launching new ones.
The agenda, clearly, is to sell the existing inventory. Where does this place the homebuyer? In a very advantageous position! This gives buyers an edge to negotiate and grab the best deal.
Plotted developments back in the game
The supply and demand of plots is likely to strengthen further as these are easy-to-liquidate assets for both developers as well as homebuyers.
After the surgical strike against black money in late 2016, the supply and demand for plots recorded a major dip. As land transactions involve a larger cash component, builders shied away from launching plotted developments.
But now with the dust of demonetisation settling down, plots have once again made a comeback in the realty spectrum of the southern cities.
As per our research, plots had the clear majority in Bangalore in Q1 2018 as against the same period in 2017.
Of the total units that entered the market in this quarter, a whopping 64% were plots, followed by apartments with 34%. Chennai and Hyderabad also recorded a supply of 22% and 31% respectively.
This trend is likely to continue as plots are easier to sell, and the cost involved is comparatively lower than other property types. Also, several leading names in the industry have ventured into this segment, which has further strengthened the confidence of buyers and investors.
Ready-to-occupy properties to rule the roost
The demand for ready-to-occupy properties may pick up pace. In fact, as developers focus on completing their existing projects, there will be ample supply of ready properties.
There is an undeniable need for developers to focus on timely project executions to avoid a penalty under RERA. Further, post the roll-out of Good and Services Tax (GST), the demand for completed properties have increased significantly. (Note: there is no GST for completed properties)
Affordable housing is the rage
Incentives like relaxed GST rates, granting of infrastructure status, and changes in carpet area norms offered to affordable housing have strengthened the hold of budget housing in the country. As the ambitious 'Housing for All by 2022' mission approaches its deadline, there will be an increased focus on this segment.
Realising the immense potential, several real estate majors are now looking to venture into this segment. Thus, supply in the affordable segment (within Rs 50 Lakh) is likely to move northwards in the coming quarters.
In one of the major developments in 2018, 1BHKs and studios have made an astounding entry into Chennai's realty space.
Another trend worth mentioning here is the rising popularity of 'half-a-room' in the realty scape of Bangalore's market. These additional half rooms are convenient and affordable options for couples, singles, and young professionals who have just embarked on a new journey. Moreover, for a small family, these half-BHKs are value additions because they are mostly used as study areas.
To sum it up, like the previous year, 2018 is shaping up to be a year of restricted new launch supply but with improved sales velocity. It will be interesting to see how things unfold in the coming months, won't it?
This article is contributed by Gowri Shankar Nagarajan, Co-founder & CEO, RoofandFloor