Increase in population, the rising concept of nuclear families, tourism sector gaining more popularity, growth of IT-based companies, and a few more factors have led to the booming of real estate in India. However, the road has not always been smooth for the industry. Let's examine the performance of real estate, considering the years 2018 and 2019.
Indian real estate in 2018
The beginning of 2018 seemed promising for the real estate sector in the country until the non-banking financial companies (NBFCs) crisis came into the picture in October of that year. The NBFCs were primarily giving real estate companies funds to start new projects, construction, financing, etc. as banks were not lending them. Crisis in NBFC affected the construction work of the projects, eventually resulting in the shutting down of many of them.
At the same time, the health of late former Finance Minister Arun Jaitley had started deteriorating. Piyush Goyal took temporary charge of the Ministry of Finance and remained busy with the budget. Then, the government going into the election mode, forming of NDA2 government, and Kashmir issue kept the real estate crisis unsolved.
Indian real estate in 2019
With GDP growth rate during the first quarter of 2019-20 falling to a 6-year low of 5%, real estate along with other industries faced the heat of an economic slowdown. The liquidity crisis in the sector and weak demand from the buyers have affected the sale of residential property in India the most.
On the other hand, the commercial segment in real estate continues to go through a positive movement and remain a ray of hope. Mixed-use projects comprising of retails, offices, corporate suites, villas and hotels all in one place are multi-functional and economical. Hence, such type of projects remains on demand.
Affordable housing segment performs well
The last couple of years had piled up inventories, and 2018-19 had builders realise to focus on clearing the unsold housing units and complete the construction of existing projects. The launching of new projects has become a secondary process. The ongoing mission of Housing for All by 2022 under Pradhan Mantri Awas Yojana has brought developers into confidence. They have been increasingly constructing affordable housing projects and receiving a positive response from homebuyers. Hence, the affordable housing segment will potentially rule residential real estate for more years.
Measures taken by the government
During November 2019, Finance Minister Nirmala Sitharaman announced ₹ 25,000 Crores fund for the real estate sector. In the presence of Prime Minister Narendra Modi and Hardeep Singh Puri as the Minister for Housing and Urban Affairs, she declared this amount of fund to complete the stalled housing projects in the country. The fund will cover around 1,600 projects with 458,000 housing units, considering around 100,000 units in Mumbai, around 200,000 units in the National Capital Region (NCR), and rest units in other cities. The residential property in India covered under this fund will be the one subjected as a non-performing asset (NPA) by banks as well as those facing bankruptcy proceedings under the NCLT while meeting eligibility criteria.