Commentary on Real Estate Market in India – Real Times
Overview on the real estate industry in India: Urban Properties in India comes from nine cities namely, Chennai, Bangalore, Hyderabad in South, Kolkata in East, Mumbai and Pune in the west and Delhi, Noida, Gurgaon in the Northern part of India. These nine cities may be contributing close to about 60 % of Real estate development. The gap between the supply and demand is huge in affordable housing and it may take long years to meet the demand for the economically weaker housing.
Effect of RERA and GST to the real estate market in India: RERA will bring down the number of players in the industry on one side and on the other side will have few good quality players. RERA will discipline the industry. But for the RERA and the industry to be successful, there needs to be some correction on the current RERA bill. GST will also help real estate growth in long term, but in short term the cost is likely to go up marginally.
‘Housing for all by 2022’ and how builders like Shriram can play a role in achieving this objective: Our Prime Minister’s vision of Housing for all by 2022 is a noble cause. Once this is achieved, this one mission alone can take our country to different heights. This will bring lot of prosperity to our country – crime rate will come down by more than 50%, productivity will go up by at least 30%, and people would become more civilized. This must be done like an emergency for the prosperity.
The role of FDI in real estate in the creation of affordable housing: I would divide this into two parts. One is ‘Affordable housing’ and the other is ‘Housing for All’. What is most important for our country now is Housing for All. Only this will uplift our society. For us to make this Housing for All to come true, we need affordable long term capital. It can be through FDI or ECB or even long term bonds. We need to look at various options of making cheaper funds available for this sector.
* New growth markets across India
* Interest of PE investors, Venture Capitalists in the Indian Properties market
It is a fact that some of the PE investors haven’t made good returns so far. But the interest remains bullish from both PE investors and Venture capitalists.
* Focus on Tier 2 and 3 markets for real estate growth opportunities
* Key consumer trends, buying patterns and overall outlook of the real estate industry
* Role of real estate in Urban Infrastructure
Real Estate plays a very critical role in Urban Infrastructure. Real estate defines the city architecture, city’s culture and its behavior. Real estate Properties and the urban infrastructure should go together. If we look at the civilization and older cities, the urban infrastructure and real estate were one phenomena and it was not two different. Urban planning always included the real estate. This is even applicable to some of the latest smart cities like Barcelona, Shanghai, Singapore and even our very own Chandigarh. It just reflects the nature of the people. There are two ways to deal with this – build the city’s real estate based on the nature of their people or define the real estate with urban infrastructure to reflect the nature of the people. Historically, the rulers have used real estate and urban infrastructure to build a better society and to define the nature of their society.
* Escalating land prices and the role of government
* Technology in real estate
* Housing units in Southern India
Bangalore has natural advantages as a city despite its huge problems on its infrastructure development. Chennai also has a lot of natural advantage because of its industrialization and higher level of literacy rate. Hyderabad follows these two cities. Having said this, the infrastructure that has been created in Hyderabad and the Government’s vision plan for the next 20 years are incredible. If Bangalore and Chennai do not give focus on its urban infrastructure, they could lose out to Hyderabad in the next five years.
* Real estate, a major player in the scheme of urban development
Once again, Make in India can bring solution to a major level. We may have to focus on industrial and agricultural development for our long term sustainability. While creating the city design, we need to keep these two factors in mind.
* Rental housing as a key consumer pattern
Indians believe in owning homes and this acts as security to them. Hence I doubt whether rental housing can be a solution. Also given the yield Vs cost of funds, it may be difficult for rental housing to become successful. This can become success when the gap between the yield and cost of funds reduces. For the properties not to become expensive, we need to focus on infrastructure growth.
* Regulations impacting the industry
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