Real Estate Recovery Still a Distant Dream
The Indian real estate market is still reeling from the effects of demonetization, GST, and new regulations, with new project launches at a 13-year low.
Real EstateReraGstDemonetizationIndian EconomyReal Estate NewsJul 15, 2024
The value of new projects launched in financial year 2017-18 was 23% lower than that of 2016-17 and 5% below 2015-16. The largest project launched in the June quarter was the Farrukhnagar Industrial Park Project, worth ₹600 crore. However, the stalling rate in real estate projects remains high, with an all-time high of 13% in the first half of 2018, resulting in over ₹2.5 trillion stuck in stalled projects.
The stalling rate in commercial real estate projects is particularly high, at 20%, while housing projects have a stalling rate of 11%. The sluggishness in the sector can be attributed to RERA, which has led developers to put new project launches on hold while they gauge the impact of the regulations on their ongoing and tentative projects.
Furthermore, bank lending data shows that there has been very little pick-up in borrowing for real estate, with credit growth to commercial real estate consistently falling since 2014 and remaining at subdued levels. Consequently, property prices have stagnated or fallen in many cities, especially where investment demand was a big driver of the real estate market. Suburban markets in Delhi-NCR and Mumbai have been hit the hardest.
Given the increasing likelihood of policy rate hikes in the coming months, interest rates are likely to harden, which will raise borrowing costs and likely dampen real estate investments. All these factors indicate that the Indian real estate market is still far from recovering from its current slowdown.
Information
The Centre for Monitoring Indian Economy (CMIE) is an independent economic research organization that provides data and insights on the Indian economy. CARE Ratings is a leading credit rating agency in India.
The Real Estate (Regulation and Development) Act (RERA) is a landmark legislation that aims to regulate and promote the real estate sector in India. It was introduced in 2016 and has been implemented across the country since 2017.
Frequently Asked Questions
What is the current state of the Indian real estate market?
The Indian real estate market is still reeling from the effects of demonetization, GST, and new regulations, with new project launches at a 13-year low.
What is the stalling rate in real estate projects?
The stalling rate in real estate projects is currently at an all-time high of 13%, with over ₹2.5 trillion stuck in stalled projects.
Which segments of the real estate market are most affected?
Commercial real estate projects have a stalling rate of 20%, while housing projects have a stalling rate of 11%. Suburban markets in Delhi-NCR and Mumbai have been hit the hardest.
What is the impact of RERA on the real estate market?
RERA has led developers to put new project launches on hold while they gauge the impact of the regulations on their ongoing and tentative projects, contributing to the sluggishness in the sector.
What is the outlook for the real estate sector?
The outlook for the sector does not appear very bright, with interest rates likely to harden, raising borrowing costs and likely dampening real estate investments.
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