Is the real estate industry in India finally on the path of recovery?

After the government implemented the reform movements like demonetization, GST and RERA in the last two years, the real estate industry had shown a slow growth. However, recent trends show that the industry is recovering at a good pace. With a greater transparency in the industry, the investors are interested in buying real estate, both in the residential and commercial sectors. Investors and homeowners can visit the property sites in India to check out the latest projects, developed by the leading real estate companies. The demand for residential property in the important cities has increased, while the purchase of commercial properties has also risen in recent months. Besides, the levels of inventory are lowest in the last eight quarters.

However, the liquidity crunch in the non-banking financial companies is proving to be a hurdle for the fast growth of the real estate sector. In FY 14, the market share of NBFC in developer financing has increased to 53% from 24%, as of March 2018. The realtor companies across the country are developing new projects, that cater to the needs of luxury home buyers as well as affordable home buyers. In general, the industry seems to be on the path of recovery. Once these hurdles are sorted out, the real estate industry will continue to grow at its normal pace.

After the inception of the RERA, the developers are unable to get equity from new sales. The housing finance companies and banks are not entitled to lend for purchases of lands. Therefore, the new supply constituted private equity, NBFC loans and so on.

Although the operating environment has been unstable, a compound annual growth of 14% has been recorded during the financial years 14 to 18. A 4.5 % CAGR was recorded in the funding to the developers by the banks in this period. According to the NBFCs, the CAGR was 45.3%. However, while considering fundraising through the private equity deals and REITs (real estate investment trusts), the traction appears to be less.

As a result of the funding crunch, the large real estate players are expected to strengthen their positions, some of the mid-size companies have defaulted on the loans. In reality, the market share for these big companies has increased to 75%, as compared to 30% for the new launches in recent years. This may result in a greater consolidation in the real estate industry, as the large players have greater funding avenues for their projects. The balance sheets of the organized players are relatively liquid and they have got a good sales momentum. People investing in real estate now can enjoy good returns in the coming months. Investors and homeowners willing to purchase property can visit the real estate sites in India for the completed and upcoming projects.