PROPERTY INSIGHTS India Quarter 3, 2017
Total Page:16
File Type:pdf, Size:1020Kb
PROPERTY INSIGHTS India Quarter 3, 2017 INDIA REAL ESTATE OVERVIEW – YTD 2017* Introduction The Indian residential real estate sector has from launching and marketing new projects. remained sluggish with unsold inventory levels Developers are making intrinsic changes to their remaining high and declining sales in key markets in business structure, operations and marketing the last couple of years. The housing market in strategies to comply with RERA norms. Until the Mumbai has been further adversely impacted by the second quarter this year, buyer sentiments had implementation of demonetization in the last quarter dampened and enquiries and walk-ins had dropped to of 2016, and the implementation of the Real Estate a large extent as they adopted a wait-and-watch mode (Regulation & Development) Act (RERA) and Goods & to evaluate the impact of these reforms on prices. Services Tax (GST) this year has deterred developers Real Estate (Regulation & Development) Act (RERA) RERA is touted to be a significant regulatory measure to bring in greater transparency and accountability in the real estate sector. It endeavours to protect the rights of consumers through its regulations, which penalizes errant developers through the establishment of a Real Estate Regulatory Authority in each state. It clearly defines liabilities and responsibilities of developers while providing an effective grievance redressal mechanism to the buyer. It seeks to provide a fair market for developers, real estate intermediaries and buyers to transact in the real estate market. 26 states and union territories have notified the rules under the Act, only 6 states have established their respective permanent Real Estate Regulatory Authority. North-eastern states, Goa and West Bengal are yet to notify the rules. Maharashtra, Gujarat, Rajasthan, Odisha, Madhya Pradesh, etc have notified RERA rules largely in conformity with the Central rules. Few states have taken greater flexibility in interpreting and defining their state rules, especially with respect to ‘ongoing projects,’ obligation of developer to rectify structural defects, deposit of 70% sale proceeds, etc Certain provisions have been exhaustively defined in the state rules, for instance, ‘co-promoter,’ ‘land and construction costs;’ under Maharashtra state rules, In terms of registration of projects, Maharashtra leads with over 13,000 registered projects under the new law. Goods & Services Tax (GST) GST is expected to bring in a lot of transparency in the sector and minimize unscrupulous transactions and multiple taxes by replacing them by a single tax regime. There are mixed views in the market in terms of the impact of RERA and GST on real estate prices. While under-construction projects will attract a net tax rate of 12%, developers are liable to pass on the input tax credit to the end consumers as the Central Government has also introduced specific provisions on anti- profiteering. The net impact on prices will depend upon the stage of construction and price of the land. However, prices are largely expected to remain stable in the next few quarters as developers may absorb any increases due to the tax as they want to focus on clearing their unsold inventory. Economic Overview GDP growth rate & Repo Rate BSE Sensex Vs Realty Index 12.00% 35000 10.00% 30000 25000 8.00% 20000 6.00% 15000 4.00% 10000 2.00% 5000 0.00% 0 7 7 17 17 17 ' ' ' 00 008 009 010 011 012 013 014 015 016 00 008 009 010 011 012 013 014 015 016 2 2 2 2 2 2 2 2 2 2 Q2 Q3 2 2 2 2 2 2 2 2 2 2 Q3 GDP Growth Repo rate Sensex Realty FDI Equity Inflow in Construction Development Policy Updates (in INR crores) GDP slowed down to 5.7% during April-June 7,508 quarter. GDP growth rate estimates for 2017-18 have been reduced to 6.5-6.7% 4,652 RBI kept policy rate unchanged, with Repo Rate at 6% due to concerns on increased inflation. 1,616 727 703 FDI in construction development surpassed the 2013-14 2014-15 2015-16 2016-17 2017-18 cumulative inflows witnessed in 2015-16 and 2016-17 in the first quarter of 2017-18 itself. 2017-18 data is till June 2017 *1st January to 30th September Source: World Bank, RBI, BSE, DIPP Real Estate Market Snapshot Residential 33% 53% -2% to 3% Decrease in new unit Share of mid segment Change in capital launches during YTD in overall launches values 2017 Office 7% 38% 2% to 4% Decline in net Slowdown in new Increase in average absorption during completions during rents YTD 2017 YTD 2017 Retail 1.95 msf F&B, 0% to 2% New mall supply Apparels Increase in mall in YTD 2017 Most active in leasing rents Indian Residential Sector Overview Affordable Segment Mid Segment Select large project launches, Share decreased to 53% in YTD 2017 from mainly in Mumbai, Pune and Ahmedabad 68% in YTD 2016 High-end Segment Luxury Segment Launches more than halved in YTD 2017 Launches mainly in Bengaluru and Pune New Launches in YTD 2017 (In Units) 145 30 254 100 181 178 788 164 1,500 1,278 8,052 2,797 4,463 1,961 7,110 3,400 2,532 10,573 2,110 3,752 643 1,662 923 Ahmedabad Bengaluru Chennai Delhi - NCR Hyderabad Mumbai Pune Affordable Mid High-end Luxury Key Trends Unit launches dropped by 33% on a y-o-y basis across the top 71 cities (Delhi-NCR, Bengaluru, Mumbai, Chennai, Hyderabad, Pune, and Ahmedabad) during the first 9 months of 2017. It is interesting to note that launches have seen a steady quarter–on–quarter (q-o-q) decline for the last 5- 6 quarters, corresponding with the announcement of RERA in March last year and the demonetization exercise in November 2016. Mumbai (36%), Bengaluru (15%), Pune (15%) and Delhi-NCR (12%) accounted for majority of the unit launches during YTD 2017. Affordable segment has witnessed a significant growth in 2017. While it grew by 32% on a y-o-y basis, its share in the overall launches increased to 41% in YTD 2017 from 21% during YTD 2016. In most of the cities, developers are directing their marketing efforts to push the sales of completed units as they are outside the purview of both RERA and GST. Buyer sentiments have already begun to improve and is reflected in terms of increase in enquiries. This is expected to continue in the upcoming festive period and could translate into higher sales. Developers are likely to be more aggressive in offering attractive schemes, discounts, etc to further attract genuine home-buyers. 1Ahmedabad, Bengaluru, Chennai, Delhi-NCR, Hyderabad, Mumbai and Pune . Index Mumbai ...................................................................................... 1 Delhi-NCR .................................................................................. 4 Bengaluru .................................................................................. 7 Mumbai Residential Overview Overall unit launches marginally increased by 1% Rationalization of unit launches during YTD 2017 from the same period last year, at about 19,400 units, led by a surge in the affordable Share of launches in price segments segment. A few large affordable housing projects 1% 1% were launched in Kalyan/Dombivli and Eastern 4% 10% 17% 10% suburbs accounting for 43% of total unit launches. 42% The affordable segment grew at a multiple of 4 55% 67% 74% during YTD 2017 on a y-o-y basis with its share increasing to 54% of total unit launches in YTD 2017 54% from 13% in YTD 2016. 28% 14% 22% Post the implementation of RERA and GST, 2014 2015 2016 YTD 2017 developers focused on marketing ready-to-move < INR 7,500 INR 7,500 - 25,000 INR 25,000 - 40,000 > INR 40,000 inventory. They offered higher discounts in completed projects and doled out schemes to Source: Cushman & Wakefield Research absorb incremental tax cost, if any, in case of For details on project launches, refer Annexure; Values psf ongoing projects. Average Capital Values – High-End (INR ‘000/sf) Location 2013 2014 2015 2016 3Q 2017 South 48.0 - 75.0 48.0 - 75.0 48.0 - 75.0 48.0 - 75.0 48.0 - 75.0 South Central 46.0 - 83.0 46.0 - 83.0 46.0 - 83.0 46.0 - 83.0 46.0 - 83.0 Central 27.0 - 65.0 27.0 - 65.0 27.0 - 65.0 27.0 - 65.0 27.0 - 65.0 North 28.0 - 48.0 28.0 - 50.0 28.0 - 50.0 28.0 - 50.0 28.0 - 50.0 Far North 12.5 - 18.0 12.5 - 20.0 12.5 - 20.0 12.5 - 20.0 12.5 - 20.0 North East 15.0 - 22.0 15.0 - 22.0 15.0 - 24.0 15.0 - 24.0 15.0 - 24.0 Average Capital Values – Mid Segment (INR '000/sf) Location 2013 2014 2015 2016 3Q 2017 South 40.0 - 50.0 40.0 - 50.0 40.0 - 50.0 40.0 - 50.0 40.0 - 50.0 South Central 45.0 - 58.0 45.0 - 58.0 45.0 - 58.0 45.0 - 58.0 45.0 - 58.0 Central 23.0 - 40.0 23.0 - 40.0 23.0 - 45.0 23.0 - 45.0 23.0 - 45.0 North 20.0 - 30.0 20.0 - 30.0 20.0 - 30.0 20.0 - 30.0 20.0 - 30.0 Far North 10.0 - 14.0 10.0 - 14.0 10.0 - 16.0 10.0 - 16.0 10.0 - 16.0 North East 8.5 - 12.5 9.0 - 13.0 10.0 - 14.0 10.0 - 14.0 10.0 - 14.0 Source: Cushman & Wakefield Research 1 Major Launches Project Name Location No. of units Launch Price (INR per sf) Chembur Central Chembur 5,800 22,900* Lodha Palava City Dombivli 2,000 5,500 Codename Big Boom Mulund (West) 308 19,500* Aurum Q Residence Ghansoli 720 26,300* Source: Cushman & Wakefield Research *on carpet area Peripheral locations like Thane (including witnessed project completions include Wadala, Ghodbunder Road), Mira Road and Navi Mumbai Dadar and Andheri.