INDIAN REAL ESTATE SECTOR: DISRUPTED, TRANSFORMED & RECOVERING
Shopping Centre News|November 2020
The developers are cognizant of this changing market condition and have effectively controlled launches to not create an oversupply situation. This adaptability and agility to respond as per the market conditions will go a long way for the sector’s growth and stronger emergence in the years to come, analyses ANAROCK in its report and surveys…

The Indian real estate sector has been experiencing continuous transformation since the turn of the century. This transition has been for the better and the accomplishments so far have been remarkable. The results are quite visible today as the sector has become better organised, compliant, accountable, and transparent compared to what it was during the last decade of the 20th century. A slew of systematic structural reforms and policy changes led to the elimination of weaker players, large-scale consolidation, and entry of large corporate houses into the Indian real estate sector.

While the sector was on a growth trajectory since the last few years and was likely to emerge stronger than before, the current Coronavirus lockdown has surely put brakes on its growth momentum. Industry estimates of the Indian real estate market, prior to COVID-19 outbreak, was projected to be USD 650 bn by 2025 and USD 1,000 bn by 2030. This certainly seems tough amidst the current circumstances. The developers are cognizant of this changing market condition and have effectively controlled launches to not create an oversupply situation. This adaptability and agility to respond as per the market conditions will go a long way for the sector’s growth and stronger emergence in the years to come.

Amidst controlled new housing launches, the residential sales-to-supply ratio has improved to 1.36 currently, as against 0.63 in 2014, reveals the FICCI-ANAROCK report ‘Indian Housing Sector: Disrupted, Transformed & Recovering’ released at the 14th Annual FICCI Real Estate Summit 2020. The improvement in this critical ratio is indicative of sustained future growth for the housing sector.

Anuj Puri, Chairman - ANAROCK Property Consultants says, “The report also highlights that in the post-COVID-19 era, affordability of mid-income homes, calculated on the ratio of home loan payment to income, will touch its lowest-best at 27 percent in FY21. It was 53 percent in FY12 and has been falling y-o-y ever since.”

Several factors will influence residential real estate revival in post-COVID-19 times. For instance, property prices have remained range-bound with weighted average prices across the top 7 cities rising only nominally at a CAGR of 3 percent between 2012 to 2019. This is significantly lower than the prevailing inflation rates and income growth.

“In the past, the value of real estate under construction increased from USD 94 Bn in 2009 to USD 243 Bn as of H1 2020 - a 2.6X increase,” says Puri. “During the same period, the share of residential real estate grew from 49 percent to 88 percent, indicating the massive expansion of this segment.”

As policy reforms and financial stress continue to eliminate weaker players, listed developers’ sales are staying on course in the current scenario. While overall sales have declined, listed developers continue to thrive on the back of homebuyers’ increasing preference for organised players. ANAROCK research’s consumer sentiment survey during lockdown also highlighted that 62 percent of prospective buyers prefer to buy a home from branded developers, even if it comes at a higher cost.

KEY POINTERS:

Value of total real estate under construction increases 2.6X - from USD 94 Bn in 2009 to USD 243 Bn as of H1 2020 - with residential share growing from 49% to 88%

Listed developers’ sales hold steady while broader market slows down; organised players the wave of the future

Affordability of mid-income homes to be lowest-best at 27% in FY21 - 53% in FY12

Indian Real Estate is Now Better Organised: Consolidation & Entry of Corporate Players Transformed the Sector

The Indian real estate sector has been undergoing constant metamorphosis since the turn of the century. This transition has been for the better and the accomplishments so far have been remarkable. The results are quite visible today as the sector has become better organised, compliant, accountable, and transparent compared to what it was during the last decade of the 20th century. A slew of systematic structural reforms and policy changes led to the elimination of weaker players, large-scale consolidation, and entry of large corporate houses into the Indian real estate sector.

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