Note ban movement and GST reform have been the two prime reasons for housing sales slowdown. The aftershock of these two moves turned the investment and the development prospect static. Major housing markets lost their respective ranking and crashing to a new low over the year. The second half of the year too witnessed a dip in sales.
Developers have been steadily focusing on sales of their ready possession stocks instead of new project launches. This trend dominated new project launches and resulted in an uptick in demand for projects those are nearing completion. Less availability of cash in the market gave birth to end-user driven market replacing the existing end-investor driven market.
Still the market favours the affordable housing segment, as investments in affordable housing segment in the country maintaining a strategic framework and across the major cities like Kolkata, Pune, Delhi NCR and Ahmedabad the segment has about 80% of new project launches. Also in the other areas those have advanced infrastructure and great connectivity recorded significant surge in end-user demand.
While Mumbai ranks 12th in the list of most favourite investment destination for 2018 was in the second ranking during the previous year and it holds the 8th position in terms of development prospects. Similarly, Bengaluru and New Delhi lost their 1st and 13th position of the previous year and stand at 15th and 20th position in the investment destination ranking and on the scale of development ranking they are at 16th and 18th slot respectively.
This survey was jointly conducted by the Urban Land Institute and consultancy PwC in where it is found that retail assets have been bringing about steady real estate investments with number of platforms or portfolio deals either already completed or under construction.
“The commercial real estate market is hooking on the retail portfolio to lure more domestic and global investment. For earning long-term, unwavering return from retail real estate sector investors are putting their money on malls and other mixed-used retail projects managed by either a proficient agency or by the development house itself,”- said Mr. Mahesh Somani, Head- East Zone, National Association of Realtors India (NAR).
On the other hand, the average appreciation in rentals has been between 8-10 per cent on a yearly basis, higher compared to office spaces lease absorption which is growing 5-7 per cent. Occupiers are now exploring the sub-markets as there is a significant change in commercial property selection too. Limited commercial development volume in CBD locations has taken the buyers exploring sub-markets in search of quality constructions in limited resource.
Residential market remained subdued due to a slew of reforms that had affected the sales lately. Also unsold inventory stocks and over supply are causing most of the foreign investors hang back. They are choosing commercial properties instead with cap rates averaging 8.5 to 8.75 per cent.
With most high-quality on-hand assets developed, international funds are turning more and more to low-risk projects and affordable housing sector. Investors should attempt increasing their performance through value-added and opportunistic strategies concerning various leverage, redevelopment and development plays too.
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