Real Estate 2020 - The Way Forward

Over the last three years, real estate investments, especially in the residential sector have been slow owing to drop in liquidity, incomes and reduction in residential real estate bookings. However, interestingly this slowdown has not deterred FDI into the sector, and the industry saw nearly USD 2.7 billion flow in the first half of 2019 itself. The Indian real estate sector has witnessed a lot of changes in the year 2019. The year gone by was in fact a year of consolidation with many policy changes and regulations, which organised the sector largely and set a strong foundation for the years to come. According to an industry report, the real estate sector is expected to grow, touching USD 180 billion by 2020.

Affordable housing, co-living and co-working space:

With a continuing thrust on affordable housing, the budget this year has been very benevolent to the middle-class home buyer. FM has offered to build 1.95 crore houses with all amenities between 2019-22. This boost in affordable housing could well pave the path for an upward growth of the residential sector in the next year.  According to a report, about 8 lakh housing units will be delivered in 9 major markets, in the next 15 months.  Almost half of these will be less than 45 lakhs. 

A new concept that could boost the residential sector is the emergence of new buyer class- Gen Y. By 2020, this new generation will be a significant part of the working group. This generation will be price conscious, sustainability conscious, highly aware of the challenges of space and money, and will drive a new phenomenon- the compact houses. They will be diametrically opposite to the aspirations of the earlier generation that chose sprawling homes - especially in the metros and mini metros. 

With the expansion of the services sector and the growth of the three tops markets- Bangalore, NCR and Mumbai, the average demand for office space across India is projected to increase by 46 million sq. ft. every year till 2021.   

Co living spaces is another concept that will drive the residential investments in 2020. As co-working spaces increase as part of office spaces, market players say it is expected to witness further growth of 40-50% in 2020. Consequently, co-living spaces will grow too. The whole concept of young investors and start-ups setting up shop, as well as home in urban centres, will drive the new concept of co-living.

Technology would be a driver for growth:

As in all other sectors, technology will shape the future of residential real estate as well. Artificial Intelligence (AI), is fast becoming the choice of function for identifying the best properties, collating data and even investigating values- in conjunction with Machine Learning. With support from the cloud for data storage and other saleable applications, the sector is benefiting hugely with Internet of Things and Robotics too.

These technologies offer various benefits- reduced operative expenses, augmented customer service, and even allowing investors to regulate costs and assure high returns. Robotics, in the form of chatbots have transformed the way customers interact with online platforms that abound in the industry. Intelligent chatbots are a huge asset to customer service, while backend RPS serve to make the processes of all business activities in the sector faster, more efficient and highly scalable. 

Real estate market consolidation:

According to reports, Indian real estate market is undergoing a major consolidation as most of the real estate developers operating in the top nine cities have either left the business or tied up with big builders due to slowdown and regulatory compliance. Moreover, entry of big corporate houses in the real estate business also has been a major facilitator for this consolidation process. In fact, there has been a massive consolidation with over 50% of the total developers that existed in 2011-12 leaving the market by 2017-18. Buyers are now looking out for developers who are more experienced in terms of quality and execution. This will further polish the developer market based on their sustainability in terms of deliveries and implementations.

The way forward:

While there was slowdown in 2019 on the residential real estate market in India, there are factors in the industry that could account for recovery by 2020. Through a push in affordable housing that the government is determined to provide, through growing FDI in commercial spaces, or through increased use of technology, or a sea change in the nature of living arrangements, we hope for a recovery in 2020 and expect it to be more promising for developers as well as homebuyers.