Expect a steady recovery in Indian real estate over the next 18 months

As I have described in another article, the last 14 years have been a roller-coaster ride for Indian residential real estate market. The period between 2003 and 2008 was a boom time with prices increasing, almost doubling in some cases.

After a two-year slowdown arising from the global economic crash, 2010-2014 again saw huge supply and prices rising again. The final three to four years of this period have witnessed the dip of the business cycle, with sales having slowed down to half, unsold inventory increasing, and prices remaining flat.

This was also the period when the consumer became increasingly unhappy with the developer community, with a spate of false promises and project delays. The investor community, taking a cue from this, and buoyed by rising equity markets, also voted with their feet on the real estate market.

As per PropTiger’s DataLabs Realty Decoded Report, developers in the top nine cities of India had been together launching 40-45,000 homes (units) in each of the first three quarters of FY17 (Apr 2016-Dec 2016), including in the dreaded third quarter when demonetisation took place.

The first three months of 2017 saw about 51,000 units being launched, possibly on the back of improved sentiment post demonetisation and some to get in before RERA got implemented.

Launches crashed to about 30,000 units in April to June this year, as developers got busy with applying for RERA approvals for existing ongoing projects. RERA has been implemented by the book only in Maharashtra, and hence the pains of RERA will continue to bog down developers in other cities. Hence, launches will continue to be soft in Q2 of FY18 (July-Sep), and possibly even lower than Q1 level of 30,000. After that, launches will follow sales as described below.

Credit: Money Control