Realty Recovery Will Be Arduous, Progress Possible Over A Year

Even as the economic slowdown and liquidity crisis continue to ail India’s real estate sector, industry leaders are hopeful that the beleaguered sector will see improvement in sentiment over the next 12 months.

“…One can’t say for sure when is it going to recover, but I would say 12 months, by when real estate should start picking up in a big way. Demand has latently disappeared and the volume of production coming into the market is lower. This is when people with deep pockets (investors) can take advantage and funds are picking up properties at rock-bottom prices,” said Niranjan Hiranandani, co-founder, Hiranandani Group, at the Mint India Investment Summit and Awards 2020 during a panel discussion on recent developments and outlook of the real estate sector, moderated by Chintan Patel, partner and head, real estate at KPMG in India.

Tata Realty managing director and CEO Sanjay Dutt said the company has seen 60% growth in sales and its strategy of having a portfolio of affordable homes helped. “We were at the tail-end of finishing our projects, so our inventory is now ready, and the benefit of GST (goods and services tax) helped. Finally, the (Tata) brand also helped in the current environment. But we continue to face competition from local, credible players.”

The realty slowdown has prolonged for over five years now, and accelerated with the crisis in NBFCs, which were active lenders to the sector.

Dev Santani, head, special opportunities and credit, India, Brookfield, said the sector has to go through this pain for a one-time clean-up. “There is a lot of latent demand in residential, and for us it’s an opportunity when credit is really tight, to go out and put capital with good developer partners and assets.”

Among the various regulatory changes that the sector has gone through, the introduction of Rera, or the Real Estate (Regulation and Development) Act, 2016, and goods and services tax (GST) is believed to have fundamentally impacted the sector.

MahaRERA chairman Gautam Chatterjee said there has been a clear shift in the kind of projects getting registered now with ticket sizes of apartments reducing, and 75-80% of them being less than 60 sq metres.

“In January and February, we had 1,000 projects registered with MahaRERA and currently have 24,500 projects registered. Even smaller developers who are coming up with these projects are optimistic that they have sized the homes right and there is demand.”

Developers said there was a need for government support. “The sector should be out of the woods in the next four quarters only if there is support from the government. We want one year period to restructure our debt, and get a moratorium of one year. Secondly, there needs to be ease of doing business and if we can get a single window clearance, then our costs will be down 10-15%,” Omaxe Ltd CEO Mohit Goel said.

Industry experts feel the sector can draw more foreign capital if it can convince investors on predictable long-term returns. “Perception plays an important role and if we change that, there will be more capital coming in. What investors expect is predictability, though they are ready to take risks,” said Kunaal Shah, partner, Trilegal.