Bottom Line: The Indian real estate market remained muted in the first half of Q2 2019 due to the general elections. The outcome of the elections has since buoyed market sentiment towards the real estate industry and strengthened political stability.
These developments, along with improved transparency in the sector, are big positives and bode well for foreign direct investment (FDI) in real estate. Meanwhile, developers have revamped their accounting and management systems to meet due diligence standards and attract funding.
“The appetite for greenfield projects will remain strong as land is available for disposition and demand for core assets will continue to be robust. Warehousing and co-working sector will continue to flourish”, said Suresh Castellino, Executive National Director, Capital Markets & Investment Services at Colliers International India.
Liquidity levels remain low as banks and NBFCs showed few signs of lending following the news on Dewan Housing Finance Corporation (DHFL) where they have planned to evaluate other options like selling their share/stake to repay their obligations. Most of the banks and NBFCs also are open to selling their real estate portfolio in a bid to reduce exposure.
Various private equity players are reviewing the holdings of these institutions and we could see a very big portfolio sale transaction in this quarter involving DHFL. However, there is a lot of action in alternative sectors such as co-living and student housing with players such as Stanza Living, Hamstede and Oyo on a signing spree.
Residential sales and new launches are expected to improve; affordable and mid-segment are expected to lead amidst government initiatives and a realignment of the product mix by developers.
More buyers are expected to participate in the purchase of properties as GST for under construction residential & commercial projects including affordable housing has been reduced by 7% to 5% and 1%, respectively, with no input tax credit to the developer.
But developers will also enjoy cost-savings as no intermediate tax is applicable on Transferable Development Rights (TDR); Joint Development Agreement (JDA); Lease of space and Floor Space Index (FSI) purchase.
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