What Are The Real Estate Trends in 2018?

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What Are The Real Estate Trends in 2018?

Analysing the projections of a strong economic revival, the Indian real estate sector is poised for growth in 2018. The International Monetary Fund (IMF) has predicted that the Indian economy will grow at 7.4 percent in 2018 and will regain the fastest-growing economy tag by 2019. Earlier, the World Bank had stated that the Indian economy will register a growth rate of more than 7 percent. Leading credit rating agency, Moody’s has also upgraded India’s Sovereign Credit Rating to Baa2 from Baa3. While 2017 was challenging due to demonetisation experts believe that policy changes such as GST (Goods and Services Tax) and RERA (Real Estate (Regulation and Development) Act) will boost the realty sector in 2018. Here are some of the key trends that will dominate the realty sector in 2018.

Growth in FDI and NRI investment: 

Foreign Direct Investment (FDI) was already at an all-time high of $60.1 billion in the last fiscal and this is expected to grow further in 2018. The boost in FDI has been made possible, thanks to the  FDI rules and regulations that have been simplified across 21 sectors including the construction sector. India has become a preferred real estate investment destination along with Hong Kong, China, and Singapore, where investors are aiming for high returns in the range of 13 to 15 percent. NRI in-investment in Indian real estate is also expected to get a boost in 2018, as buyer confidence is high with the introduction of RERA. Earlier, there was the risk of investments getting stuck due to project delays, but things have improved dramatically with RERA. Increased NRI investments are expected to boost the luxury housing sector in 2018.

Affordable housing push: 

With government’s focus on affordable housing, as part of the plan to provide housing for all by 2022, the affordable housing segment is expected to register further growth in 2018. The affordable housing segment got a major boost last year when the government raised the carpet area for affordable homes. This has increased the total number of homes that are now eligible to receive a subsidy under the Credit Linked Subsidy Scheme (CLSS). For MIG 1 category, the carpet area has been increased to 120 sq. mt. from 90 sq. mt. For MIG 2 category, the carpet area has been increased to 150 sq. mt. from 110 sq. mt. With the increased carpet area, builders are now witnessing increased demand for such properties.

Focus on execution: 

RERA has made it tough for unscrupulous builders to get away from owning responsibility for unexplained project delays. The judiciary has also taken a tough stand against builders who have failed to keep their promises. Many cases have been filed against builders and the courts have taken strict action against such builders. Experts believe that with RERA and judicial action, the bad eggs in the real estate sector will be removed. Builders will increase their focus on execution and project completion, which is good news for homebuyers. Already, buyer confidence is increasing and this is expected to boost housing sales in 2018.

Realty boom in Smart Cities and Tier II cities:

As metro cities reach saturation and experience high property prices, homebuyers are looking at alternative property options in Tier II cities. Many businesses are also moving to Tier II cities, as operational and manpower costs have increased substantially in metro cities. This has ensured good employment opportunities for those planning to shift to Tier II cities. Moreover, many of these Tier II cities are now covered under the ‘Smart Cities Mission’, which will boost infrastructure development and civic amenities. The increasing preference for Smart Cities and Tier II cities will boost real estate development at these locations in 2018. This will be visible across both housing and commercial real estate development.

Industry consolidation: 

The real estate sector will experience increased consolidation in 2018, characterised by mergers, partnerships, and joint ventures. Builders will be looking to reduce costs and access external funding, which will provide a fillip to mergers, partnerships, and joint ventures. Also, with the introduction of RERA, the compliance burden has increased for small developers and they are likely to merge or partner with larger realty businesses. Foreign investors and banks are generally averse to providing credit to non-compliant businesses, something that will help weed out fly-by-night operators.

Property prices had come down last year, owing to the temporary effects of demonetisation and GST. However, the reduced prices did not translate into increased demand. Homebuyers were following the ‘wait and watch’ approach till now, as there were a number of uncertainties due to economic reforms. As the economy is on the path of revival and with growing buyer confidence, the demand for housing is expected to increase in 2018. It will increase the probability that property prices may move north in the near future, as demand picks up. This is an appropriate time to buy property, as prices are still low and buyers have a wide range of options to choose from.

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