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Affordable Housing Segment To Give Major Boost To Real Estate Sector In 2018

Feb 07, 2018 11:41 AM

Bengaluru has been an important hub for the real estate sector in India. With an ever-increasing number of people choosing to make this city their home, the demand for affordable housing is only getting better and better. Recently, experts have revealed that this segment will continue to drive the real estate sector in 2018. Several institutional funds and developers are eyeing this segment in the hope of better returns. Not only the end-user demand but also the various government incentives are making sure that more and more affordable projects are taken up by developers.

The scope of business categories will be expanded by established developers. Already certain premium developers in Bengaluru as well as in India have expanded their offerings to small and efficient boutique homes for the middle-income people. This trend is expected to continue. Real estate business will soon become a standard process as the property development environment becomes more conducive to growth brought about by GST and RERA implementation. With RERA bringing more transparency in the sector, homebuyers are again looking at real estate in a more positive light.

Timely delivery of projects and the promise of legal protection of investments have instilled fresh confidence in buyers. Speaking of India, the top eight cities launched 74,000 new residential units, a decline of 35 percent. Only the affordable housing segment saw a rise in 2017. This segment saw a year-on-year growth of six percent.

“2017 was a precursor to the much-needed stability of the residential market as seen in the nature of launches, which was led by affordable housing. The sector is likely to continue realigning itself to end users’ demands well into 2018,” MD of India Cushman & Wakefield, Anshul Jain, told The Economic Times.

Realty sales in 2018 will receive the much-needed boost from affordable housing because of Pradhan Mantri Awas Yojana (PMAY) and low interest rates. Even though GST and RERA made developers grapple over their business, the government made its stand very clear on affordable housing. The cash flow rate of affordable projects is much higher than traditional real estate. This is because units are generally sold out way before they are constructed.

“This translates into better risk adjusted returns for investors. It is possible to realise over 20% internal rate of returns (IRR) consistently across market cycles,” said Brick Eagle CEO, Rajesh Krishnan.

The Housing For All 2022 program is expected to create more than two million jobs yearly, construct 60 million new houses, and boost the economy by more than US$1.3 trillion.

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