August 11, 2018

Two reports released by CREDAI, at the NATCON 2018 conference, indicate a rise in investment prospects in India

The real estate sector’s apex industry body, CREDAI, released two reports in Berlin this week, and both indicate a sharp improvement in prospects. The CREDAI-JLL report recorded a 25 per cent surge in sales during the first half of the year compared to last year, while the one undertaken by CREDAI-Cushman & Wakefield shows heightened private equity investment in the April to June period of this year.

Both reports were unveiled at the Confederation of Real Estate Developers’ Associations of India (CREDAI) NATCON 2018 conference.

Sales surge in top cities

According to CREDAI-JLL Report, the growth witnessed in H1 2018 can be attributed to two large factors, “firstly returning buyers’ confidence on account of implementation of RERA in most states, and stable capital values that have started to show an upward bias”.

The report also observed that the general consensus among the buyers has been that the markets have bottomed out, and prices and value are now expected to move upwards.

“These two factors, have pushed many fence sitters and new home buyers to take the purchase decision. This is despite the fact that the RBI has increased its REPO rate in the third monetary policy, making borrowing for home loans dearer,” the report noted.

While Mumbai saw the highest sales volume at over 13,600 units in H1 2018, Bengaluru followed closely with 13,300 units and recorded a marginal increase of 2 per cent in sales year-on-year (y-o-y). Pune also saw a minor increase of 2 per cent recording a sales volume of approximately 10,000 units. Both these markets saw steady trends closely mirroring the market activities from H1 2017.

Sales have jumped significantly in others cities, however. Chennai saw sales grow by 57 per cent, while Kolkata topped the percentage chart for y-o-y growth in sales to record a rise of 280 per cent. “Hyderabad too recorded significant y-o-y activities with sales volume rising by over 180 per cent in H1 2018. Both Kolkata and Hyderabad markets had seen very limited buying activities last year, thus making the sales volumes of H1 2018 stand out significantly,” the report noted.

Investment begins to rise

Meanwhile, the CREDAI–Cushman & Wakefield report also shows marked improvement in investments into the sector. The office sector, for instance, recorded inflows of `4,295 crore ($0.6 bn), which is a 39 per cent increase from the corresponding quarter last year. This segment constituted almost half of the investments committed by foreign investors, retail segment constituted 26 per cent, and industrial segment constituted a 10 per cent share in investments by foreign investors.

“Office sector took the lead in investment activity making up for 42 per cent of leasing activity during Q2, 2018, while, the average deal size increased by 21 per cent y-o-y at `1,560 cr during Q2 2018, Mumbai attracted highest PE investment at `2,800 cr followed by Chennai and Delhi NCR,” the report noted.

Supply up, too

Another joint report unveiled by CREDAI–CBRE at NATCON indicates an influx of 500+ mn sqft of new office, retail, warehousing and residential supply in India’s real estate by 2021, owing to positive reforms and strong investments. “In the office segment, leasing activity in the first half of 2018 has already crossed 20 mn sqft with Bengaluru, Delhi NCR, Hyderabad, and Mumbai accounting for more than 80 per cent of leasing activity. The industrial and logistics segment witnessed a take-up of almost 10 mn sqft of space in H1 2018, which was equivalent to the entire annual take-up of the year 2015,” the CREDAI statement said.

Industry puts forward demands for incentives

The conference also saw the industry set forth multiple demands and suggestions to improve the health of the sector. CREDAI asked for incentives for developers participating in the affordable housing to continue the growth momentum.

Other demands included enabling tax benefits to projects registered prior to June 1, 2016, reducing land area utilization to 50 per cent, a 12 per cent GST with ITC and 2/3rd land rebate in metro cities, Development Rights (DR) in Joint Development Agreement (JDA), redevelopment agreements and Transfer of Development Rights (TDR) exempt. Housing loan interest deduction against ‘Rental Income’ for self-occupied property increased to `5,00,000 for realising the Government of India’s vision of ‘Housing For All’.

According to CREDAI, NATCON 2018 saw over 1,000 member developers and experts from the real estate sector, senior professionals from the financial world and ancillary industries participate in the three-day long convention aimed at facilitating best practices and learnings, stressing on the importance of real estate as one of the building blocks of a nation’s economy. The participants included key capital market players from India and around the world and government officials.

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Source: epaper.newindianexpress.com