The Indian real estate sector may finally be on the road to recovery as per several reports. Residential property is seeing higher demand in several major Indian cities according to experts and commercial property demand has also picked up in recent times. The overall levels of inventory are at an all-time low at present if you take the last 8 quarters into account. The liquidity squeeze in the NBFC space is however impacting the realty sector at present although it looks poised to make a gradual recovery in the near future. NBFC market share of financing for developers has gone up to 53% by March 2018 and after RERA, several developers have been unable to get sufficient equity from new home sales. With HFCs and banks not allowed to offer funding for buying land, new supply has been majorly funded through loans from NBFCs and private equity.
However, overall funding has seen an increase (CAGR) of 14% for FY14-18 in spite of the perceived slump in the sector. The funding squeeze should boost the market position of top real estate players with many mid-size players facing liquidity hurdles. Market share for big real estate developers has increased to a whopping 75% from 30% in terms of new launches over the last few years or so. This may lead to more consolidation in Indian real estate with big players having more channels for funding new projects. These are organized realty companies that have higher liquidity and healthy sales volumes which means that they can sustain the overall growth momentum.
There are no financing problems seen in case of under-construction projects and completed units of reputed and big realty developers who are also offering subvention schemes. However, smaller developers working on projects under construction still have to get funding issues sorted. Price cuts in the sector could be a last ditch move to increase sales volumes although there are anxieties with regard to booking cancellations. However, several investors and big players are seeing the current scenario as an opportunity to purchase stressed assets and there should be more consolidation over the next couple of years. All in all, cities like Hyderabad have been doing very well in terms of real estate sales and new launches while the MMR (Mumbai Metropolitan Region), Kolkata, Bangalore and Delhi-NCR have seen things pick up in terms of overall industry growth and recovery. All of these trends point at a steady recovery for the realty sector in India in the near future.
