The year 2019 was a mixed bag of opportunities and disappointments for Indian real estate. The industry largely remained stagnant, with declining consumption, low investment appetite and property prices in most cities not budging from current levels.
India’s GDP growth reached 4.5 per cent in the second quarter of this financial year — the lowest in the last six years.
In the residential segment, affordable housing was the winner with nearly 40 per cent share of the estimated 230,000 new unit launches. The second-highest share was of the mid-segment at 33 per cent, followed by the luxury and ultra-luxury segment with 10 per cent.
Sales in the housing sector saw a modest 4-5 per cent year-on-year growth in 2019 with 258,000 homes estimated to be sold during the year. New housing launches saw 18-20 per cent annual growth with new launches in the region of over 230,000 units.
The government’s interventions throughout the year — such as the creation of an alternative investment fund of Rs250 billion (Dh12.86 billion) for funding of stuck projects, reduction in corporate taxes, and various tax benefits on affordable housing purchase did not yield an immediate effect. But the benefits will become evident in 2020.
What NRIs can expect
The time is right for investing in India before prices harden.
Greater transparency with more projects getting registered with RERA (Real Estate (Regulation) Act) gives NRIs reason to regain confidence in Indian real estate. This increasing transparency means timely delivery of projects. There is now a grievance redressal system in place to safeguard the investor interests.
The commercial office segment remained vibrant and has been a big draw for foreign investors thanks to steady demand and rising rentals. Rental returns from office will be the main attraction for NRI investors in 2020 and will be a key decision driver for NRIs focused on this lucrative segment.
As housing prices remain stagnant, NRIs can target quality projects at affordable prices, including office spaces. The rupee’s continuing arbitrage adds to the overall value proposition for Gulf-based NRIs.
The Alternative Investment Fund (AIF) of Rs250 billion will ensure the completion of several stuck affordable and mid-segment housing projects. NRIs should get debriefed by their trusted consultants on these reviving opportunities for housing plays.
The ongoing liquidity crisis will result in increasing consolidation, leading to the stronger emergence of branded developers. This reduces the risk factor for housing investments significantly.
Key government initiatives
Merging of the NRI portfolio route with Foreign Portfolio Investment route results in a wider product spread.
Easing of KYC norms for foreign investors.
What to expect
The first-half of 2020 may not see much traction as most of the government initiatives and other positive developments need time to take root. The second-half will begin to show more rapid growth.
Property prices will see very gradual growth as the market remains bullish on the slow revival of residential projects. The government is expected to roll out new policies to improve investor sentiments and boost sales. Pronounced market consolidation is expected, increasingly shifting investors’ focus to large, well-financed developers.
The key sectors for investment will be affordable housing, co-working/co-living spaces, logistics and warehousing, and offices.
Though the range of options for NRIs today is spread across India, the western and southern parts are drawing the most interest.
* Key regions within the Mumbai Metropolitan Region drawing NRIs are the peripheral central suburbs, parts of the western suburbs, the central suburbs (upmarket areas like Wadala) and Thane. As per research, these markets have had both capital appreciation and sales velocity in the recent past.
* Pune has also been on the buying radar of the Indian diaspora for quite some time now. Micro-Markets like Kalyani Nagar, Hinjewadi and Balewadi are the most sought-after markets offering a range of property options.
* The economic hubs of South and East Bengaluru are also one of the favourites among NRI investors. Micro-Markets like Devanahalli, Whitefield and Sarjapur Road are offering a bouquet of premium and affordable residential projects.
Shajai Jacob is CEO-GCC at Anarock Property Consultants.