Residential housing sector likely to pick up in 2020: Report
The report released by Colliers, a real estate consultancy, said that government’s decision to set up the Alternate Investment Fund to provide debt financing would help the housing sector to recover.Updated: Jan 24, 2020 11:15 IST
After the office space rental market touched a new high in 2019, leasing in this sector is likely to witness a relative decline in 2020, while the residential sector that has seen a prolonged slowdown might see an uptick in sales in the second half of the year, stated the findings of a real estate report released recently by Colliers International India. It further stated that housing sales are likely to pick up in the second half of the year due to a low-interest regime, which has been enabled by the policy decisions of the government in December 2019.
The report released by Colliers, a real estate consultancy, said that government’s decision to set up the Alternate Investment Fund to provide debt financing would help the housing sector to recover despite the presence of unsold inventory. The report also states that the Draft Model Tenancy Act could be a game-changer for the housing sector in the country as it would lay down the framework for a well-regulated rental housing market.
“The draft Model Tenancy Act, 2019, which proposes to create a legal framework to bring harmony to the landlord-tenant relationship has the potential to unleash build, lease and operate properties in India, wherein properties are built for rent, not for sale,” said Sankey Prasad, CMD, Colliers India.
City-based analysts also said that they expected the housing sales to pick up this year particularly due to end-user demand. They, however, said that banks will have to become more liberal in disbursing loans to both consumers as well as to developers for finishing projects. “The office space market and residential market operate in tandem. If the former is doing good, there is every possibility that it will boost the latter,” said Vinod Behl, a city-based analyst.
The report also states that within the housing sector, greater investor interest would be witnessed in distressed assets, especially at the last-mile funding stage (i.e. projects that have been stalled nearing completion stage), as some developers struggle with cash flow.
Developers in the city also said that a number of distressed project proposals are coming their way but there is a need on the part of the government to clarify the modalities to execute such projects. “A number of these projects are viable and can be delivered. However, authorities will have to make it clear about the retrospective impact of the penalties and obligations, such as fees of the project,” said Praveen Jain, vice chairman, National Real Estate Development Council (NAREDCO).
Apart from predicting a bounceback from housing, the report also states that occupiers will focus on optimising the space and mix flexible and core model to use it in line for their business needs. The year would also see the consolidation of the flexible workspace segment as larger operators with financial heft will acquire smaller companies, the report added.