Positive outlook for affordable housing, Grade A commercial real estate: Report

With the after-effects of RERA and GST settling in, the real estate sector is starting to see the initial signs of a gradual revival in the residential sector. Demand is primarily being seen from end-users only. Grade A commercial, quality retail (mall) space and warehousing continue to evince strong interest, according to Colliers Research.

Massive infrastructure investments in countries such as India, Japan, China and Indonesia will continue to create opportunities for investors, while major markets like Hong Kong and Singapore are likely to benefit from the perception of property as a relatively safe haven in uncertain times. In India, while the residential market is trying to regain momentum, commercial and warehousing sectors are likely to emerge as the key sectors to watch out for over 2018, it says.

As per Colliers Research, absorption of affordable housing projects should further gain momentum over 2018 as an impact of earlier announced policies by the government such as infrastructure status to the segment, establishment of Affordable Housing Fund (AHF) and reduced GST to 8% from 12% for under-construction, affordable and low-cost housing to ensure Housing for all by 2022.

With RERA scheduled for full implementation this year, developers are expected to focus on delivering ongoing projects on time and avoid penalties for non-compliance. Thereby, it is expected that the demand for mid-range and luxury-housing projects should continue to experience a lull over 2018 as the developers’ focus is likely to stay on project completions, it says.

“With the after-effects of RERA and GST settling in, we are starting to see the initial signs of a gradual revival in the residential sector. A gradual uptick is being witnessed even in the sales numbers of some of the developers, who have a good track record of delivery over the past few years. Demand is primarily being seen from end-users only. Grade A Commercial, Quality retail (Mall) space and Warehousing continues to evince strong interest,” says Gagan Randev, National Director, Capital Markets and Investment Services at Colliers International India.

Although, the release of fresh inventories has slowed, with only 30,000 units launched across major cities in the country, demand for homes, especially in the ready-to-move segment for end-users has gained considerable pace. The demand upswing for ready-to-move-in projects is majorly due to benefits of GST and risk-free possession, says Surabhi Arora, Senior Associate Director, Research at Colliers International India.

Commercial real estate leasing segment recorded 11.0 million sq ft of pan-Indian gross absorption in the first quarter of 2018, representing an 18 percent year-on-year rise in demand. On the supply side, the office market segment is becoming more organised with developers being strategic in their developments plans and upgrading their office portfolios. About 9.0 million sq ft of new Grade A office space reached completions across major cities in the first quarter of 2018.

As per Colliers Research, the sustained demand in commercial office segment and the anticipation of Real Estate Investment Trust (REIT) in turn, should increase investor’s appetite for commercial assets over 2018.