2018 was marked by multifarious trends and innovations while laying down the industry fundamentals in place. Earlier, the home-buyers were embracing a wait-and-watch approach, however, the launch of recent reforms such as Real estate regulation and development Act (RERA), the buyers are confident and ready to take the plunge in realty market. The introduction of RERA and Good and Services Tax (GST) has impacted the realty market to the core, with the developers grappling with after-effects of the regulatory forms. Although the real estate market is sluggish, the real estate sector had made comeback as witnessed from the new launches and new sales compared in 2018 vs. 2017.
The reforms have not only restored the confidence among the home-buyers but also set the roadmap for 2019. On the other hand, it will be difficult for the investors to decide to invest monies in the realty sector as other asset classes such as mutual funds, stocks, and traditional saving schemes are fetching much more returns as compared to realty sector.
Take a look at the exclusive article on which asset class to invest in 2019: Gold, mutual funds, equity, real estate – Which is the better investment in 2019?
2019 will be the year of the execution of the regulatory reforms, which may create a win-win situation for developers and home buyers. Fly-by-night operators will be weeded out while developers with deep pockets, adhering to transparency in the system, etc. Though this reform will impact the industry in the short-term, they are bound to benefit the sector in the long-term.
2019 will be no different as compared to 2018 for the home-buyers as the property prices will remain bleak and developers will continue to focus on existing inventory as they grapple with changes in the system and subdued demand. In fact, 2019, will be a tough year for the developers, given the recent NBFC crisis and liquidity in the system. As the realty market remains bleak, there are some new trends that you can expect this year:
In the past few quarters, affordable housing is the only segment which has gathered momentum owing to the affordability factor of home buyers and incentives are given the government to first-time home buyers. The trend is expected to gain pace in 2019 as well. There is an uptick in this segment, both on demand and supply side. The government has also extended the Credit Link Subsidy Scheme (CLSS) to middle-income group by 2020. A home buyer can avail a subsidy of INR2.67 lakhs on home loans under this scheme. In this scheme, the subsidy is credited to the loan account of the buyer through lending institutions, thus resulting in reduced housing loan and EMIs.
Rise of Co-living
Co-living is an old concept wherein young students and professionals decide to share house or apartment. Various private-owned apartments work on this concept of co-living. While the options were available in the past too, but the concept has been more organized. These spaces do offer convenience and a new lifestyle for young professionals along with bed-and-breakfast deal. These options are more available in metro cities such as Delhi, Mumbai, etc. The demand is also percolating to Tier II cities where both working professionals and students eye for affordable space.
Co-living space still remains a fragmented space, with few startups operating this space. Due to immense demand and lack of supply, many developers and startups have entered this space. The government push for ‘Right to Education’, migrant population is the major advantage of this asset class as there will always be a demand for these spaces. The Co-living operators work on long term lease model from property owners, bear the makeover costs and turn the space in a high-tech platform for residents.
Co-working is expected to strengthen its position in the commercial leasing space in 2019. In the past years, space has gained more traction and acceptability, with many MNCs relocating their existing office spaces to co-working centers. Earlier, small businesses capture a major chunk of the co-working space, but even larger corporates are occupying these spaces. With many more options coming in this space, the leasing momentum will intensify in the near future. Also, strong demand of new-age offices by SMEs and mainstream corporates will increase the demand for co-working spaces.
Currently, Bengaluru and NCR are major markets for co-working spaces. In the current times when the companies need to focus on innovation and remain ahead of the competition, these spaces foster fresh thinking and flexibility. Another factor to support the growth in the spaces is the rise of freelancers and startups as they can bypass the fixed rental cost with extra capex requirements for fit-outs and hassles of traditional office space. This not only allows the flexibility to exit the workplace but also occupy a workplace on per seat basis.
Of late, many developers have started to embrace co-working space or collaborating with the operator to provide incubation spaces or divide large floor plates for smaller occupants.
With the slump in the residential segment, any investors are looking for other avenues to invest in high-rent yielding assets. Also, acute shortage of Grade A office buildings in the commercial segment, many investors are looking for this segment. The demand for large warehousing is set to grow as occupiers are now consolidating their activities in large facilities. The gap in the demand-supply can easily be witnessed from the premium commanded by organized players. As the demand grows, more small players will either sell the space to large players, and the warehousing industry might witness a structured shift over the next 5 years. GST rationalization and growth of the e-commerce industry are the major drivers that are fueling the demand of this segment. Post the infrastructure status accorded to the logistics industry, the segment is more favorable for investors.
Investments in Tier II cities and outskirts of metros will be a good bet for hub and spoke model, thus allow ease of transportation.