Green shoots emerge, but Indian real estate remains in the doldrums

The story of the Indian residential real estate sector over the last four years has been an alternating cycle of green shoots and disruption. For the first half of 2019, while the effects of compliance with a new regulatory system and a liquidity crisis are still casting a shadow, India’s top eight property markets have shown lacklustre growth. The good news, however, is that this has forced prices downwards — perhaps not as much as potential homebuyers would have liked, but regardless, for the fourth year in a row, the price growth in most of these markets has been lower than retail inflation. Add the freebies and discounts that developers are throwing in to push sales, and Knight Frank estimates that there has effectively been a double-digit price reduction.

Mumbai houses are cheaper by 3 percent on an average, second only to Pune’s 4 percent price reduction and at par with the Chennai market which has seen rough 4 years after the floods of 2015. Hyderabad has seen a price increase of 9 percent, NCR houses are costlier by 3 percent and Ahmedabad is more or less flat with a 1 percent growth in prices.

The affordable housing sector continues to be the driving force — 51 percent of launches in the first half of 2019 were housing units priced under Rs 50 lakh, and 78 percent were units priced under Rs 1 crore. The trend has become a recurring one with developers following the government’s lead to make affordable housing a priority, and the incentives that come with that mission.

It should also come as no surprise that investors have all but deserted the Indian property markets. Knight Frank India reasons that the combined impact of RERA, GST and the Benami Transactions (Prohibition) Amendment Act have laid the foundation for what it calls “a healthy end users’ market”.

In other good news, unsold inventory levels across the top 8 markets have fallen by an average of 9 percent with Hyderabad leading the way with an impressive 67 percent decline. Mumbai, India’s largest real estate market, however, continues to languish with a 14 percent increase in unsold inventory. Knight Frank India estimates that it will take over 2 years to get rid of existing inventory.

All in all, while the market has done respectably well in light of the many crises it has fought over the last two years, a substantial recovery or inflection point still seems a way off.