The Indian real estate industry will be reaping the benefits of a reform-driven environment that is improving investor confidence while preparing the grounds for a more organized and transparent sector. We anticipate that investment flows will continue to be healthy as the reforms process in the real estate sector continues and past success stories of healthy returns encourage stakeholders for a bright future outlook.
Quikr Homes conducted a comprehensive survey which captures the perceptions and expectations of builders on RERA and GST in order to judge its impact on the Real Estate market. The survey received responses by as many as 300 participants from the top seven metro cities in India. It highlights the key factors that will shape the Indian Realty Sector in 2018.
Majority of the builders are super positive about RERA as a reform
82% of the builders believed that RERA will bring in the much-needed transparency in property dealing in the days to come and will not only increase the housing demand but also buyers trust. The regulatory environment demands greater accountability from developers and only those who adapt and change shall be able to sustain their business while also improving their chances for attracting private investments. 18% of the builders think that this act will not help Real Estate sector as project will not be allowed to launch without the requisite clearances from the government and might end up adding another layer of bureaucracy in the realty sector.
Builders are uncertain about GST as a reform for the real estate sector
The shift to the GST regime is definitely one of the most significant tax reforms in post-independence India. It has introduced “one nation one tax” system, but its impact on various industries is different. The impact of GST on the real estate sector cannot be fully evaluated as it mainly depends on the tax rates.
The survey indicates that 41% builders believe that the implementation of GST has not simplified their business operations, whereas 21% feel it has brought much-required transparency and accountability to the industry. However, another 38% are not sure about how it would play out in the long run.
RERA – The prime force in bringing back the buyers trust
Regaining buyers confidence back which got tainted by project delays, non-deliveries and litigations, will depend on the effectiveness of the policy reforms like RERA, GST and Affordable Housing to help boost buyers confidence in the real estate sector.
52% builders believe that RERA will be the prime force in bringing back the buyers sentiment and confidence, whereas 41% respondents feel that affordable housing is the way to go. On the other hand only 7% builders believe that GST will regularize the construction cost and it will bring buyers sentiment back.
Positive boost for FDI in Indian Realty market post RERA
While the Indian Realty sector has been witnessing a slowdown over the last couple of years, a slew of initiatives such as the Housing for All by 2022, The Smart Cities Mission, RERA, Benami Transactions Act, Goods and Services Tax, to name a few, have attracted a number of foreign investors to the market.
42% developers are in favour that RERA is expected to bring in a significant increase in Foreign Direct Investments in the Real Estate industry in India because of transparency and organizational set-up.
However, 45% respondents are unsure of its power to attract FDI into Indian Realty market and 13% of the builders are certain that RERA will not impact FDI.
Real estate in India is perhaps one of the most vibrant and ever growing sectors with unlimited opportunities. The real estate hotspots like the tier-1 cities of Mumbai, Delhi NCR and Bangalore have seen huge influx of money in the recent years. Cities with educational and commercial hubs have attracted more investments from buyers and turning into hotspots of the decade.
As per builder survey, 64% of the respondents believed that Bangalore, Pune and Hyderabad will be the top three cities where real estate sales would grow the fastest. However, 36% builders feel that Mumbai, Delhi NCR, Kolkata and Chennai will be amongst the top cities in sales growth
As per QuikrHomes’ sales trend from the last two quarters(April-September,2017), it is evident that real estate sales are picking fast pace in cities like Mumbai, Bangalore, Pune and Hyderabad and developers are giving priority to completion of projects and becoming RERA compliant, which eventually will work out extremely well for the industry. The builders expect 2018 to appreciate further in terms of property sales due to the evolving supply-demand dynamics, bigger Indian and Foreign Investments and improved policies auguring well for both builders and buyers in the days to come.
Real Estate prices have started to pick up post all regulatory reforms
The Real Estate industry is gradually heading towards transparency and becoming more organised & stable. Considering the current market situation, annual return rate in the range of 10-15% is considered relatively healthy. It is interesting to note that respondents in all tier-3 cities along with Pune and Hyderabad markets continue to remain too optimistic about the high return on investment.
Builders’ survey indicates that Bangalore is the top choice with 25% builders expecting it to appreciate the fastest on basis of cost per sq.ft followed by Hyderabad in second position with 19% builders expecting Real Estate prices to appreciate the fastest. Meanwhile, Pune sits at third position with 18% respondents believing its prices to appeciate the fastest.
As per QuikrHomes’ market price trend from the last two quarters, we see that Bangalore Real Estate has been stable in Q2 and Q3 as it did not witness any sudden price crashes due to it’s end-user market and thus builders expect market to appreciate post RERA attracting investments in the sector and restoring the confidence of the buyers. Meanwhile, price trends in Hyderabad and Pune reveal that prices have appreciated from Q2 to Q3 and builders expect a healthy growth in the future as compared to other metros like Delhi NCR and Mumbai, which have already reached a certain saturation level.
Realty Prospects for 2018 look brighter
With the introduction of RERA, developers are not permitted to market the project without registering it with the Regulatory Authority, and the registration can be revoked in case of violations.
Quikr Homes survey shows that a maximum 72% builders from Bangalore are planning to launch a new projects in the next 6 months. Similarly, Pune and Hyderabad have shown positive growth with 70% builders showing their intention to come up with a new project in the upcoming 6 months with proper guidelines and complete registration as they are expecting revival in buyer’s sentiment as compared to previous year quarter where only 53% builders launched a new project post demonetisation. However, there is a decline in the upcoming launches from builders in Delhi NCR and Mumbai MMR.
Affordable Housing might be the Hero
Announcement by Indian Government in favour of Affordable Housing sent a frenzy amongst the public and buyers’ sentiment and is clearly dominating the real estate market with the preferred budget range “within Rs.40 Lacs”.
The survey indicates that 45% of the respondent are planning to launch Affordable Housing Project in near future and 34% are still preferring to launch housing project in mid-segment.
Compared to Affordable and Mid-housing project, only 12% developers are preferring to launch luxury project of 3-4 BHK. Apart from these residential projects, 9% builders are showing their interest towards commercial developments.
Post announcement of infrastructure status to affordable housing, the builders expect it to be the most desirable and dominating property in the real estate market with almost 50% developers committing to launch affordable housing projects in the near future. The survey reveals a declining trend in the launching of luxury and mid-segment projects due to the dominance of affordable housing. However, cities like Hyderabad, Pune and Bangalore continue to be the most desirable choices for commercial project launches.
Online Property Platforms lead the pack for the marketing needs
Online portals will help buyers in making their purchase decision as builders will have to show more transparency, accountability and will need to furnish the correct and approved information on their portals. Future of real estate is digital as more people search for their properties online.
As per QuikrHomes Builder survey, a majority 29% of the builders believe that the Online Property Portals are the best medium to market their project for the more serious buyers as they source their information from the RERA website and only of the authentic RERA registered projects. However, 22% respondents think that marketing via Google is best suited for them as it caters to a larger audience.
Similarly, 16% believe that Outdoor mediums are still the most suitable choice for showcasing their projects, while 15% builders think that with changing times, Social media sites like Facebook, Twitter, LinkedIn, Instagram are ideal for marketing. Print Media and Radio with 13% & 5% respectively are favoured by builders for engaging a large audience.
Brokers and Internal Sales Team emerging as the top aid for builders to sell their properties
As QuikrHomes survey indicates, builders have a more reliable organisational set-up and confidence in their property listing websites.
40% builders believe that their Internal Sales Team will be the best medium to market their project as it will cater to the more serious buyers and have their loyalty to their own group.
On the other hand, 37% builders believe that it will be important to have a healthy mix between brokers and Internal Sales Team to sell their project so to capture the entire market, while a healthy hike as compared to previous years can be seen with 23% developers wanting to sell their projects on Online Property Portals as these will prove to be a very cost-effective way to reach out to end-users and also help buyers make an informed and optimum choice in making their purchase decision as post RERA they cannot be fooled through falsified information and they prefer to check for themselves before making any investments.
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