India Real Estate 2020 – The way forward
Rajan Bandelkar, President, NAREDCO Maharashtra
Despite the slowdown, the real estate industry is one of the largest total contributors to the economy. It is the second most employment generating industry and contributes nearly 6-8 % to India’s GDP. As we move into 2020, the sector is predicted to be at the center of policy changes. While we wait and watch what changes will the industry go through, here are some prominent trends, which will be the highlight of the New Year 2020.
- Increasing importance of technology:
Technology has become the backbone of all major industries. Right from retail to healthcare and real estate, the role that technology plays in development cannot be overlooked. Just like every other sector, technology has played a pivotal role in the growth of the real estate industry. From the introduction of voice assistants in customer servicing to virtual property showcases and interactive 3D visits, technology is revolutionizing India’s real estate industry for the better.
GHTC–India, which stands for Global Housing Technology Challenge India is an initiative by the Ministry of Housing and Urban Affairs, Govt. of India, that aims to identify, evaluate and shortlist innovative technologies, and use them in the sector to facilitate construction in less time and in a more cost effective manner.
- Online Expos & Property Sales:
The RERA National Conclave, which took place in November 2019, witnessed the announcement of an e-commerce platform by the government of India where customers can book their property online. The same was announced by Honorable Minister of Housing and Urban Affairs, Shri Hardeep Singh Puri. The aim of the platform is to facilitate hassle-free transactions with complete transparency, in India and abroad. Created with support from two of the largest industry organizations, NAREDCO and CREDAI, this e-commerce platform will be launched early in 2020.
- Affordable housing:
With the much required push from the government, the introduction of the Pradhan Mantri Awaas Yojna (PMAY) and the cooperation from developers, the affordable housing segment witnessed an uptick. We have seen an increase, both from the supply and demand side, making affordable housing significant in 2019. This trend is likely going to continue in the coming year as well. The recent announcement came in the last week of December stating the achievement of 1 crore landmark.
The government is likely to announce a number of housing industry friendly policies during the budget 2020. The new budget may see a multitude of benefits such as lower interest rates for home loans or no cap limit on interest subsidy on home loans. Earlier, there was a 2 Lakh cap limit. The same was increased by 1.5 Lakh, making it 3.5 Lakh during the budget 2019. We are hopeful that 2020 will see no cap limit. The 2020 budget may also see new developments in REITS and rental housing to meet the needs of the PMAY.
- Growth of new segments:
The real estate model in India has completely transformed in the last few years. We have observed an increase in demand for co-living spaces. On the commercial front, co-working spaces and warehouse spaces are in demand. Although relatively new to the industry, co-living and co-working spaces are rapidly gaining momentum. Although the idea of co-living and co-working is not new, 2020 will see a significant growth in this segment, making it more and more organized.
- Rental Housing:
According to surveys, in the US, more than 60% population is rental housing. This trend is already catching up and going forward, it is going to give a big boost to rental housing in India. The government need to implement the recently drafted Rental Housing Income Policy. The High cost of houses and high property taxes lead to a low rate of return (ROR) from rental housing, making renting out an un-remunerative proposition. To improve the effective ROR from renting, it is suggested that the deduction from rental income be increased, which will promote rental housing.
- Changing consumer demands:
Millennials, as a generation are very different from their forerunners. They have a completely different perspective of lifestyle and standard of living. They are looking for residences that reflect their personality, and are health and environment conscious. They have a hectic lifestyle and hence want their home to be a place where they can relax and rejuvenate without leaving the city. To cater to this demand, developers are making community livingprojects, which include rooftop jogging tracks, rooftop swimming pools, gardens, gyms etc.
Despite the setbacks and fears surrounding the real estate industry, we are hopeful that the changing policies, government’s support and cooperation from all the stakeholders of the industry, will bring about a positive change in the sector. India’s real estate industry is a work in progress and with time, and as begin yet another new year,it will evolve to attain proficiency and effective resolutions.