YEAR IN REVIEW. Will 2017 open new vistas for realty sector?

Though not a terrible year for the real estate sector, 2016 was definitely a difficult one for it. Despite sluggishness in sales caused by weak buyer sentiment and demonetisation taking a further toll in 2016, most real estate developers are hoping that 2017 will augur well for the sector, ushering transparency and accountability into the sector.

While some significant reforms took place in the realty sector during the year, overall, the year can be divided into two crucial phases.

While on the one hand, the trend of falling real estate sales – a norm since 2013 – was arrested; the impact of demonetisation and Real Estate (Regulation and Development) Act (RERA) was visible in sales numbers on the other hand, with government registration offices and developers both suggesting a huge drop in new property offtake.

“The first 10 months of the year broke the trend of falling sales in the residential sector, a trend which had continued unabated since 2013. Sales plateaued at about 50,000 units a quarter in the first three quarters of calender year 2016, down from almost 1.5 lakh units a quarter in CY2013.

“Sales for the large, organised players hit an all-year high in October, riding on Diwali and increasing optimism in buyers’ minds. This optimism arose from a stabilising GDP growth rate and the many small projects that had been launched by the Centre over the past two years,” said Sunil Mishra, Chief Business Officer (Primary Sales), PropTiger.com

However, post-November 8, when Prime Minister Narendra Modi announced demonetisation of ₹500 and ₹1,000 notes, sales in the sector fell a whopping 40 per cent.

Anshuman Magazine, Chairman, CBRE India and South-East Asia, notes: “The residential market in 2016 continued its shift from a pure, price play mechanism towards a market driven by commitment to delivery, quality and right pricing strategies.”

Anuj Puri, Chairman & Country Head, JLL India, added: “For the real estate industry, 2016 saw the biggest changes in decades, especially on the policy front. Some of the biggest game-changing policies, such as GST and RERA, cleared hurdles, and are on their way to full implementation. The demonetisation move caused considerable turmoil; however, along with the Benami Transactions Act, it promises to bring greater transparency in the real estate sector.”

Puri said affordable housing will come into sharper focus now than in previous years, and REITs promise to open up the real estate market to smaller investors in the coming year.

The commercial sector saw huge offtake, with office space requirements of sectors, such as manufacturing, logistics, and FMCG, among others, showing positive signs in 2016. Industry watchers expect this to continue in 2017.

A pan-India trend that emerged in 2016 was that of a higher number of units being sold every quarter (Q1 FY16 - Q3 FY16) than new project launches in the same period.

The Centre’s focus on affordable housing has helped make the term more acceptable to developers. From the earlier trepidition of being tagged as developers of affordable homes, the community is now not only entering this segment with confidence but also discussing it openly. Navin Makhija, Managing Director, The Wadhwa Group, said: “The residential segment continued to reel under the pressure of inventory overhang resulting in moderation in the number of new project launches, as focus remained on delivering existing projects. Sales momentum picked up after the second quarter due to promotional offers during the festive season. The commercial segment witnessed progressive growth with multiple deals taking place during the year.”

Sam Chopra, President, NAR-INDIA, said: “The year 2016 has helped shape the real estate industry with the government initiating some key reforms. The major initiative has been implementation of RERA, REITs, and the Benami Transactions Act, while FDI has also been making the headlines. These new initiatives will be a huge catalyst in helping the real estate market revive by mid-2017 as against the earlier forecast of late 2020.”

Prashant Tiwari, Chairman, Prateek Group, an NCR-based developer, said: “The changes in the real estate market have already started taking place with measures like not increasing the base rates, implementation of Real Estate (Regulation & Development) Act, relaxation in FDI norms and exemption of service tax on construction of affordable houses up to 60 square meters.

The Benami Transactions Act, infrastructure developments, and many other proposals in the pipeline will eventually see the realty market progress.”

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