Is growth in the housing sector finally moving up?

Shishir Asthana

Is the housing sector slowly crawling to normalcy? Data from various agencies tracking the real estate sector suggest so.

According to data analytics firm PropEquity, demand for flats increased 7 percent during 2018 to nearly 2.15 lakh units. While Knight Frank says that housing sales rose by only 6 percent during 2018, JLL India said housing sales rose 47 percent in seven cities, ANAROCK suggested a 16 percent rise in seven cities and PropTiger showed 25 percent rise in sales in nine big cities. The difference in the figures is primarily on account of variation in locations in the respective reports.

Irrespective of the data we pick, the real estate sector has shown growth. In fact, city-specific data shows that some cities have shown remarkable growth.

Take the case of Bengaluru----data provided by PropEquity show the city saw a 19 percent rise in sales to 38,525 units during 2018, while sales in Chennai grew by 40 percent to 14,920 units.

Mumbai posted a sales growth of 9 percent at 22,413 units, while Pune was better at 16 percent or 49,706 units and Kolkata at 14 percent with sales of 14,166 units.

There were cities which posted negative growth, as was seen in Gurugram with a drop in sales by 16 percent at 9,425 units, Noida fell by 5 percent at 3,828 units, Hyderabad by 17 percent at 15,486 units and Thane by 2 percent to 46,347 units.

Taken as a whole, there was an overall growth in housing sales. But thanks to the high level of inventory in the system, new launches came down by 22 percent to 1.46 lakh units in 2018 as against 1.87 lakh units in 2017. This helped in bringing down inventory by 10 percent to 6 lakh units.

So where is the growth coming from and more importantly is it sustainable?

A peculiar trend in the sales that took place was in ready-to-move housing units or the projects that are nearing completion. This indicates that the houses bought were by genuine users and there was almost no presence of ‘investors’ who in earlier days were funding the builder by buying flats at very low rates.

This in itself is a sign of the success of the Real Estate (Regulation and Development) Act, 2016. Not only has it helped clear black money from the sector, but it has been a boon to the consumer.

Anuj Puri, founder, and chairman of Anarock has been quoted as saying that the fallout of RERA and GST was still very visible in 2018, but the dust is beginning to settle. With developers and brokers accepting the new market realities and starting to fall in line, the residential sector is regaining its viability. Transparency and accountability – never the defining characteristics of Indian real estate – became the 'new normal' this year, he added.

Around 40 percent of the sales were also from the ‘affordable housing’ segment. Puri makes an interesting point here when he says that 2018 saw almost every real estate developer – regardless of market footprint and previous category orientations – eager to take a bite out of the affordable housing pie. This segment was earlier avoided by high-end builders but given the speed at which sales of affordable housing was picking up, everyone wanted to cash in on the boom.

Another important point that helped sales was prices, which were more or less flat during the year. This, plus the fact that the Indian courts passed some landmark judgments, nudged the builders to clear their inventory rather than face legal action for the delay.

Affordable housing is expected to drive growth in 2019 too. With effects of RERA and GST waning down and the builders and developers falling in line, the sector does hold promise.