The year 2019 was a non-event for the residential real estate market in India as sales growth remained muted and investor interest was subdued, according to a report by real estate consultancy firm ANAROCK Property Consultants.
Overall housing sales in India in 2019 rose by a modest 4-5%, with over 2.58 lakh homes sold during the year compared with 2.48 lakh housing units sold in the previous year.
The report noted that branded developers gained ground this year, with some listed players performing well in terms of sales and revenue growth. However, smaller developers continued to perish or collaborated with the bigger players due to extreme financial constraints.
Anuj Puri, chairman of ANAROCK Property Consultants, said: “Multiple developers fell off the grid while others still struggle to stay viable. However, strong players with healthy balance sheets — in many cases diversified beyond real estate — sailed through 2019 and recorded decent housing sales and revenue growth.”
Average housing prices in 2019 also maintained status quo across top seven cities in India, with a minuscule 1% yearly gain in the Mumbai Metropolitan Region (MMR), Pune, Bangalore and Hyderabad. The National Capital Region (NCR) and Chennai saw no change at all, while Kolkata saw a 1% decline in 2019, the report said.
The only good news for the housing sector came in the form of new launches, which increased 18-20% to 2.3 lakh units in 2019 compared with 1.95 lakh units launched in 2018.
Affordable housing also remained in demand due to multiple government sops announced for the segment. The government this year announced tax deductions (amounting to Rs 3.5 lakh in a year) on interest amount of home loans below Rs 45 lakh availed by first-time homebuyers. An alternative investment fund (AIF) of Rs 25,000 crore was also launched to facilitate the completion of stuck affordable and mid-segment homes.
Luxury and ultra-luxury segments, however, remained limited to end-user interest, with “no serious investor activity”, said the Anarock report.
The commercial real estate segment emerged as the winner in the year 2019. The report noted that India’s office real estate sector remained the top-ranking real estate asset class. “India’s office real estate sector was decidedly vibrant in 2019, with demand for Grade A office space spiralling upward while vacancy levels in prime locales reduced.”
By December-end, the country’s office supply will have risen by 13% to 43.3 million sq. ft. in 2019 as against 38.2 million sq. ft. in 2018.
Commercial spaces also continued to attract maximum PE (private equity) investments, totalling close to $3 billion of funds in the first three quarters of 2019. In the corresponding period of 2018, total inflows within this segment equalled nearly $2.1 billion.
Other real estate asset classes like co-working, logistics and warehousing, co-living and student housing also gained traction in 2019, attracting slow but steady investments, the report said.
Interestingly, the Anarock report noted that the current trends indicate that the first half of the year 2020 will not see much growth over the patterns of 2019. However, the second half does hold promise as the positive impacts of various government measures kick in.