Real Estate: Strong Demand To Drive Growth
In 2019, the real estate sector is expected to grow across all its sub-sectors—residential, commercial, affordable, and warehousing
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Experts are gung-ho on the realty sector as we enter 2019. And they have solid reasons to be so. Their confidence stems from several sources such as data analysis of existing inventory, their delivery, recent launches and the overall signs of positivity. Many experts see strong demand driving the residential sector in 2019. Based on hyper activity among the e-commerce players, the demand for modern warehousing space is also expected to increase many folds this year while the demand for commercial space is going to hold steady, which is a positive for the sector, point out experts.
“The overall supply volume in the residential category is expected to be 10-15 per cent higher than 2018 levels. While pricing in key cities such as Delhi and Mumbai will be largely stable, it may see some upward shift in select markets such as Bangalore, Chennai and Hyderabad,” says Anshuman Magazine, Chairman, India and South East Asia, CBRE, a leading consultancy firm. “Additionally, with a largely stable policy environment, we can expect stronger recovery in the housing market in 2019,” he further adds.
As of 30 November 2018, India witnessed $5.1 billion worth of investments in the real estate sector with a bulk of the private equity investments taking place in the commercial sector. “It is worth mentioning that PE investment in commercial real estate extended beyond metros and Tier 1 towns,” says Magazine.
Commercial real estate space is looking good too. For 2019, around 35-40 million sq. ft (mn sft) worth of new commercial real estate space is lined up for completion with Bangalore, Hyderabad, Gurgaon/Noida expected to account for the maximum share of this new supply. In 2019, experts believe that there will be strong demand from agile workspace operators (co-working/business centres/hybrid space operators). These players will further strengthen their business by leasing 7-9 mn sft by 2020. Rishi Das, co-founder and Chairman, IndiQube, a leading managed workspace/ co-working space provider agrees. “In 2019, managed office space is going to be the new default standard for most of the companies who require up to 500 seats. It is good to see that a few states are coming up with a new regulatory framework which considers managed workspace operators as suppliers, not end users. This will give a big boost, not only to the managed workspace sector but, also to the builders,” says Das.
The business of residential sector that impacts more consumers than any other is said to be on a strong wicket. “We foresee 2019 as a much more promising year for the residential real estate along with retail and hospitality sectors. A key factor impacting the sector in 2019 would be the rise of new age home buyers,” says M. Murali, CMD, Shriram Properties, a leading real estate player based in Bengaluru.“Understanding this opportunity, real estate players today are coming forth with new concepts of projects like integrated living. This is supported by changing buyer preferences which is shifting the landscape of the real estate market,” says Murali.
Affordable housing will continue to attract more and more developers to launch projects even in 2019 says R.K. Arora, Chairman, Supertech, a Noida-based developer. “Because of increasing urbanisation and the government’s active support, affordable housing, which was previously a neglected segment, is gaining considerable mileage in recent times. The financial support from the government and the thrust in policies are driving more and more developers to make inroads into the fairly untapped segment,” says Arora.
In 2019, industry experts believe that there will be strong demand from agile workspace operators (co-working/business centres/hybrid space operators). These players will further strengthen their business by leasing 7-9 mn sft by 2020.
Gurugram-based leading infrastructure and commercial building developers ASF Group CMD Anil Saraf predicts the growth of ‘student housing’ as the next big growth driver starting 2019. “As per recent reports, office absorption in 2020 is expected to exceed 2011’s historic high of 37 million sq. ft. While the new growth drivers would be affordable housing, logistics and warehousing, the expectations are that student housing will emerge as a Rs 2,400 crore market by 2020,” says Saraf.
When asked to comment about the growth areas in 2019 within the real estate sector, Anurag Mathur, CEO, Savills India says that the industrial and warehousing sector will continue to be the biggest beneficiary of the GST regulation due to simplified tax regime, faster movement of goods and warehouse consolidation. “The investment in real estate has demonstrated a CAGR of 40 per cent over the last five years. Larger component of this investment still is directed towards the residential sector (36 per cent) with offices (31 per cent) and hotels (12 per cent) being second and third respectively,” says Mathur. He is of the opinion that 2019 will prove to be a decisive year for India politically due to the general elections but unlikely to have any major impact on the economy or the real estate industry as such. “From our point of view, demand continues to remain robust across all asset classes, even though the velocity and volumes may be more nuanced,” says Mathur, whose company is part of UK-based Savills Plc, the global real estate services provider listed on the London Stock Exchange.
Niranjan Hiranandani, President, Naredco (National Real Estate Development Council) says the real estate industry has evolved rapidly in terms of accountability, transparency and compliance mechanism. However, he concedes that the residential segment faces challenges to cope up from the rippling effect of liquidity crisis hit by NBFC blow. “Locking up of 70 per cent funds in escrow and postponement in logging sales to save tax burden on under construction property has created urgency to source out alternative fund avenues for the ongoing projects and relieve liquidity crunched sector on priority. As we enter 2019, we look for some sort of magic to conjure up funds and ensure the sector remains work in progress,” Hiranandani says adding that Naredco remains bullish about the imperative growth of housing to gear up India’s GDP growth at the projected rate of 7.8 per cent.
Like everyone else, CBRE’s Magazine, too, says that 2019 should be a positive year as all the market indices are looking stronger.