Then And Now: How Indian Real Estate Has Changed Over The Years
The Indian residential real estate market has been going through a churning process for past few years and as mentioned in our age old mythological scriptures, such an amrit-manthan did bring out the nectar! The world is changing real fast and the technological advancements have brought about monumental changes in the way we conduct business that are showing up in the real estate market in a massive manner. From the grassroots level till the policy devising rooms of the government, there’s a sea change in the way things happen.
Let’s have a look at various aspects of realty sector to get a better understanding:
If we look at the last five years, year 2012-13 was the last time we saw the markets performing beyond expectations. Not only new launches, but sales and prices of the properties were also going north and then the economy started slowing down massively and growth almost stalled. That, coupled with inherent problems within the real estate sector slowed down things drastically. Unsold inventory touched record levels, sales came to a halt, liquidity crunch brought a lot of developers to their knees and new launches almost trickled down. However, 2016 has seen a revival in India’s economy with growth for the CY 2016-17 being projected at around 7.6% and along with interest rate cuts announced by RBI, the overall sector is moving towards positive phase again. Add to it the developer’s attractive schemes and discounts to bring back the buyers and you can see sales getting the traction again with prices rising slowly, but steadily.
The economic boom of early 2000’s that got carried forward in the initial phase of this decade led to many developers making hasty decisions and setting unrealistic expectations. Unplanned launches, financial mismanagement, not having their ears to the ground led to severe liquidity crunch, a fall in sales and bad reputation. However, serious players have learnt their lessons and tightened up their belts to deal effectively with the changed economic scenario. Most of the existing players are focussing on new projects that cater to the existing demand for housing. For example, mid-level housing in the price range of Rs. 30 lakhs to Rs. 75 lakhs are in demand while unsold inventory in major hubs including Mumbai, NCR-Delhi and the likes is upwards of Rs. 1-2 crores. This anomaly is being corrected as new projects are being launched in areas with price factor in mind. Along with that, the existing projects are being liquidated with easy loans, extra discounts and better financing. There is no stupendous turnaround as of now, but the movement is in the right direction. One of the major shortcomings has been in the timely delivery of houses, but the reputed builders with long term goals are trying to ensure completion of existing projects rather than mindlessly launching new ones.
The end user has been patient enough to defer buying his dream house at sky-rocketing prices while at the same time making investments in the projects with the right mix of price and need. They have also become more aware, been investing time in doing diligent research and exploring various options before investing their hard earned money. Raising their voice against fraudulent developers has created awareness and ensured that both the executive as well as the judiciary takes note of their concern and bring necessary legislative and policy changes to make the sector more transparent and efficient.
With smart phones in every hand, sales don’t happen only in the physical world, but in the virtual world as well. Out of 350 MN internet users in India, 200 MN access the net through smart phones today as per Google. That’s the power of mobile technology today. 5 years have seen the advent of social media in a big manner and e-commerce has grown massively. On the one hand, the developers have realised the reach internet provides in tapping the potential customers, on the other hand buyers also find it easy to explore various options virtually before physically checking out the short-listed properties. Builders have come up with virtual tour of properties, approaching potential buyers online, there are websites acting as platforms for any and every kind of property across the country and great efforts are being put to provide as much detail as possible to ensure transparency. Add to it, eAuctions are also being initiated and offer a lot of promise even when buying new properties. This Omni Channel business model, involving both offline and online modes of business is shaping up the industry of the future and looks like the most viable option.
The real estate sector is expected to touch $180 billion by 2020 and is currently contributing almost 5-6% to the country’s GDP. Apart from that it also generates a lot of employment opportunities directly and indirectly. Understanding its importance in the national economy, the relevant authorities are doing their bit to make the sector come out of the dumps and achieve its potential. Hence, we hear of initiatives like Smart Cities, Housing for All by 2020, AMRUT etc. whereby the average citizen will get to live a quality life with roof on their head, the sector will receive the necessary stimulus and support to contribute in nation building without compromising on the business aspect. However, the most important legislation to make a huge impact is RERA (Real Estate Regulation and Development Act) that will change the way business is done till now. It will bring efficiency, will make developers answerable, cut out the fly-by-night operators bringing bad name to the sector and ensure complete transparency in the business dealings. The consumer will be heard and will not be cheated of his rightful dues with financial implications for builders trying to cheat the average consumer. This will lead to building up of trust between the buyers and the developers that will go a long way in growth and sustainability of the entire real estate sector.
These developments clearly indicate that change is on the horizon. When any business is conducted keeping in mind the welfare of the end consumer, it flourishes. With substantial set-backs in the recent past and the realisation amongst both the builders’ lobby as well the government about the disadvantages of flawed policies and uneven playing field, the sector is set to witness a more organised and cohesive approach towards building infrastructure. Whether it is the developers or the authorities, every decision is being made keeping customers in mind truly making him the KING! This approach will result in turnaround of the sector giving boost to investments and a healthy positive growth.
In simple words, residential real estate is nothing, but providing people their dream home. A home has emotional values rather than being just a business transaction. Once all the players i.e. developers, authorities and the middle-men understand it, success is guaranteed. The environment is ripe for growth, slowly, but surely!
Ashwinder Raj Singh, CEO – Residential Services, JLL India