The Indian real estate is set to see important changes in the aftermath of the general elections in 2019.
Although a series of reforms measures taken by the Modi government has catalysed growth impulses, investors are waiting to see the political changes in the coming elections as they are crucial for the further direction the government policies would move.
Already the Indian realty sector is in a firm recovery mode, with both foreign and domestic individual and institutional investors becoming active.
It is not only end-users but also investors who are pinning hopes and aspirations on the upcoming general elections, and on sustainable macroeconomic growth in the country.
Analysts say that real estate has always been a preferred asset class for investors in the country. Like end-user demand, investor sentiment is waiting in the wings for the market to become more conducive again.
Commercial real estate has retained its status as the most buoyant sector, both in 2017 and 2018. With the IMF pegging India’s economic growth at 7.3% in 2018, this segment gained – and continues to gain – traction across major cities.
Demand for Grade A office spaces is growing and vacancy levels are declining in prime locales.
Simultaneously, India’s first REIT listings are a sure-fire draw for liquidity infusions into the office sector. REITs will cause commercial property players to focus even more on this segment to cater to the sustained demand from occupiers across the IT/ITeS, BFSI, manufacturing and co-working sectors.
In terms of retail real estate, about 85 malls are in the pan-India deployment pipeline over the next 5 years. Of these, over 30 new shopping malls accounting for almost 14 million sq. ft. are expected to open shop in the top eight cities in the next two years.
Low vacancy levels and high rentals in Tier I cities have also kick-started faster expansion of organized retail in tier II cities, including Coimbatore, Lucknow, Ahmedabad, Mangalore and Chandigarh.
Analysts say private equity players will become extra cautious in lending to developers, become more selective, and engage in extremely deep due diligence before making any bet in the currently tense market environment.
They will prefer to back projects nearing completion. In the short term, funding for greenfield projects will cease to exist. This will inevitably impact new launches across cities.
PEs have been seen to be more focused on commercial real estate and commercial real estate developers have also historically shown a marked preference for private equity.
Analysts expect that home loan interest rates will see a slight rise in the near future, primarily brought on by the dearth of funds.
Non-banking housing finance companies will also be a lot more cautious about disbursing loans and will be conserving liquidity till the market returns to normalcy. This can reasonably be expected to put an upward pressure on home loan rates.