Indian Real Estate: Gazing into 2016
Growing India, and the real estate industry, we are hopeful of going into the New Year with a positive outlook, driven by an overall improvement in the economy over the next 8-12 months, which in turn will help boost job creation and consequently revive real estate consumer sentiment. End user driven markets across the country are expected to hold steady. In the mid-to-long term, the real estate and infrastructure development sector can derive indirect but significant benefits of pro-growth initiatives launched by the government this year, viz. the Smart Cities mission, Atal Mission for Rejuvenation and Urban Transformation
(AMRUT) and the Housing for All mission, all of which can help set off a new beginning in India’s urban areas, which are potentially key drivers of high rate economic growth. The relaxation in FDI norms for construction and realty bodes well for the future of the sector, as do initiatives such as ‘Make in India‘, the introduction of GST (as and when) and the development of dedicated freight corridors, which can foster growth in key industries (e.g. manufacturing) that support demand for industrial real estate.
The evolving Indian home buyer – With respect to the real estate consumer, positive steps such as the lowering of interest rates, increase in loan-to-value ratio and reduction in risk weightage against home loans have contributed to an improvement in consumer confidence. Interestingly, real estate consumers aren’t just purchasing homes anymore; they are instead increasingly buying into companies that develop quality homes, and the values that such organizations represent. The Indian home buyer is thus displaying a marked preference for demonstrated brand credibility, reliability, transparency and prior track record as key decision influencers, both in primary and secondary property markets.
Given this transformation in consumer preferences, with buyers increasingly gravitating towards brands that demonstrate thoughtfulness and customer centricity well past the initial point of purchase and across the product lifecycle, it is but natural to expect an ensuing shift in focus on execution and delivery within the developer ecosystem as well.
On the regulatory front – Improved governance through measures such as single window clearances, time- bound/speedy approvals, quick legal remedies for investors and faster resolution of consumer woes can achieve significant turnaround in overall industry growth and revival. The Real Estate Regulation Bill passed for parliamentary consideration can help restore buyer, lender and investor confidence via a strong focus on transparency and accountability; however, escrow account mandates might lead to liquidity issues resulting in increased borrowing and interest burden. One may also expect some consolidation within the industry, subject to market dynamics and financial capacity. The lack of a roadmap on how to address delays due to changes in regulations or late clearances is an important area of concern.
Sustainability in design, architecture; construction best practices – We’re witnessing a global commitment to tackle climate change that is fast gaining momentum, encompassing nations, industries, governments and the general public. Today there is also growing consensus on how the real estate & infrastructure sector, though a contributor to climate change, is also an essential part of the solution to ensure a low carbon future for the planet. Towards this end, the Indian real estate sector is increasingly adopting sustainable, inclusive development practices and policies by default, rather than as an ‘alternative’ proposition.
There’s a perceptible shift in focus to ensuring that the lifetime operation of developments – right from construction, to use and end-of-life phase – is sustainable. Home buyers too are for more sensitized to the long term value proposition of green homes, both from a utility consumption perspective (green homes are more economical in the long run!) and keeping in mind the need to invest in buildings with a conscience. India, second only to the US in terms of its overall green footprint, is expected to significantly increase its proportion of green developments in the coming year.
Like most major emerging economies, India has been witnessing accelerating urbanisation; 600 million people are expected to make urban India their home by 2031, with the current housing deficit in the country likely to double at around the same time, in the absence of any meaningful intervention. It is abundantly clear, therefore, that the time to align stakeholder interests in the common pursuit of sustainable, long-term sector growth is now.
Anita Arjundas, MD & CEO, Mahindra Lifespaces
The views expressed in this article are author´s own.
