Realty sector poised for better growth, say experts

The real estate sector is expected to grow better in the coming quarters of the current financial year, due to new supply of mid-segment and low-cost housing projects, according to top property developers and consultants.

Real estate, along with financial services and professional services, grew 2.2 per cent in the fourth quarter of 2016-17, becoming a drag on the country’s gross domestic product (GDP), which grew 6.1 per cent during the period. The Q4 growth of the segment was the lowest in the past financial year, mainly due to demonetisation and resultant indecisiveness among buyers.

Anshuman Magazine, chairman - India & South East Asia at property consultant CBRE, said the supply of low-cost housing was expected to improve in the next couple of quarters. “There is a robust demand for low-cost homes but the supply is limited now. Sales will improve in the next couple of quarters but price recovery may take some time,” Magazine said.

The government had announced a slew of sops for the affordable segment in the Union budget.

Rajeev Talwar, chief executive officer, DLF, the country’s largest developer, said sales in real estate would be better in FY18. “Real estate will perform better due to the recovery in economy, jobs being created, robust demand for commercial properties, improved footfalls in malls and so on,” Talwar said, adding sales in the affordable housing segment were doing well and would boost the sector.

Home sales halved in Mumbai and Noida in Q4FY17, compared to the corresponding period of the previous year, according to data collated by research firm PropEquity.

Demonetisation hit the sector badly in the third quarter of 2016-17 but sales bounced back since the middle of Q4, experts said. J C Sharma, vice chairman and managing director at Bengaluru-based property developer Sobha, said from a low base in FY17, the sector was set to grow in the current financial year. “RERA [Real Estate (Regulation and Development) Act] will help the sector,” Sharma added.

Construction activities also declined 3.7 per cent during Q4FY17. “It would be hasty to jump to any conclusion on the construction front based on the contraction of 3.7 per cent. The effects of demonetisation, which were probably not that evident in the last quarter, have cropped up during the current quarter, as the sector settles with the new change in policy,” said Bharat Dhawan, partner, Mazars India.

Dhawan said these effects should dampen over time, as both the buyers and sellers started settling within the new framework. The implementation of RERA to ensure greater transparency would further improve consumer confidence in the industry, he added. This, coupled with the government’s drive towards affordable housing and low-cost financing, can turn around the construction activity in the coming months, he said.

A senior government official said, “Let us not shrink construction to roads alone. One of the biggest construction activities is in the housing sector, where availability of stock is higher than the occupants and the real estate pricing is low.” 

As far as road construction is concerned, total national highway construction was 8,208 km by the National Highway Authority of India and the ministry of road transport and highways for FY17, which is 30 per cent higher than the previous year. These roads are over and above the state highways, district roads and rural roads.