After a prolonged period marked with stress on several levels, India's housing market is set to enter a new year, expecting to see better times.  While it's hard to forecast if the much-awaited normalcy is in store for the sector in 2020, some predictions could certainly be made on how the markets will behave. Mentioned below are prophecies on key benefits that homebuyers would see in India's housing markets in the coming year.

Will property prices come down?

Unfortunately, the answer to this question is in the negative. While, there are talks about a crash, it's hard to find cheaper homes when one actually goes looking for properties on the ground. 2020 isn't going to be any different and the logic behind this is simple. As builders are coping with a severe liquidity crisis, reducing unit rates isn't much of an option. In a scenario where they don't have many lenders willing to grant loans, they can hardly be expected to play around with their only chance of getting liquidity.

Will consumer rights be more protected now?

Real estate authorities are making a positive change as market regulators. In states like Maharashtra and Haryana, buyers can already see a change in the market as state RERAs pressurise builders to be clean in their dealings. Also, justice is being delivered much faster than the regular judicial system. As authorities in other states catch up, this could be a country-wide phenomenon.

Will more builders go bankrupt?

Considering there has been considerable stress on the liquidity front along with a demand slowdown, even some of the grade-A developers are walking a tight rope walk to remain profitable. In a situation like this, we may see the list of builders with questionable solvency, grow bigger.

Will the NBFC crisis deepen further?

Signs of a problem in the non-banking finance world became visible when sector giant IL&FS reported several defaults in 2018. The problem further got aggravated with DHFL showing similar problem. As more NBFCs are seen joining that dubious league - with Altico the latest to join in - the crisis might go deeper in 2020. This would, however, lead to consolidation in the sector that, despite the existing regulations, grew large wildly.

Can home sales numbers improve?

Irrespective of the measured launches to prod buyers to invest, home sales numbers continue to move downward quarter after quarter as the demand from home buyers has reduced substantially thanks to the negative market sentiments. In 2020 also, the problem might persist, unless a turn-around becomes obvious.

Will festive offers become obsolete?

While builders continue to launch festive offers to improve sales, the number and volumes have been declining substantially in the past five years. Since builders might not really be in a position to offer discounts, festive offers are expected to be few.

Will home loan rates fall further?

With GDP growth touching an over six-year low of 4.5 per cent in Q2 FY20, signs of growth remain elusive despite a 135 basis point (bps) reduction in rates through the course of 2019 by the banking regulator, Reserve Bank of India (RBI). Banks, on the other hand, haven’t been able to pass on the benefit to borrowers because of the stress in their own liquidity conditions. As the RBI is expected to lower policy rates further to fuel demand, banks may offer lower interest housing loans in 2020.  

Will instances of project delays reduce?

Developers know that in case of project delays, they will have to compensate buyers and so the promise of early delivery of projects has come down. Consequently, the number of new launches would also decrease in the year to come.

Which markets would perform comparatively better?

While the housing markets in the NCR might continue to struggle because of the builder insolvency and project delay issues, markets like Hyderabad, Bangalore and Mumbai are likely to perform better, primarily because of an office-space fuelled demand.

What about rental housing?

As more and more people defer their plans to buy a home in the current scenario, the rental housing segment in India is doing better business, including the co-living segment. However, states have yet to pay any attention to the model tenancy law launched 2019. Rental housing could become more organised if states act upon the model law and come up with their rules in this respect.  

Would it be a good idea to invest in a house in 2020?

Considering housing loans are cheaper and property prices are stable, it makes perfect monetary sense to buy end-user property in 2020. The same is true for you to plan and earn rental income by investing in a second property.

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Builders, 2019 Is The Time To Walk The Talk

Highly unreasonable are those guides who preach prospective homebuyers to get emotions out of the way and apply only and only logic when they make the biggest purchase of their lives. Without questioning the merit of the advice, it is safe to say that most of the buyers would never be inspired to make such a move if they were not driven by their emotions. In fact, even those who pride themselves of being in the game to simply flip properties and make money would be overweening if they claimed they were above all emotions. Even if it is paradoxical, and we don’t say it is, emotions will continue playing the lead role in home-buying stories, money playing the character that has the capacity to make or break the plot notwithstanding. It is in this context that we should analyse the performance of India’s real estate market in 2018 and its future in 2019.

It’s only words!

Even though sales numbers indicate good times a-coming, homebuyers are a long way from overcoming the dilemma they feel in a market, which has attracted a great deal of negative publicity in the recent past. However hard it tried this year to dispel the negativity heavy words such as ‘insolvency’ brought to the sector by countering them with light words such as ‘affordability’, India’s real estate could do only little to achieve that design in 2018.

Amid a rise in home sales numbers during the year in nine key markets, no solution is in sight for lakhs of homebuyers in the national capital region alone where the country’s top court is striving hard to find a solution to three super-complex cases pertaining to realtors Amrapali, Jaypee and Unitech. Even as solutions to these cases remain elusive, new cases of builders going insolvent are cropping up one after another. That the government has awarded on homebuyers the status of financial creditors in insolvency proceeding through a change in the insolvency code is also not making things any better, sentiment wise. The fact of the matter is that one invests in an immovable asset to get a property and not to get dragged in long-lasting insolvency proceedings. Even if justice is delivered to every homebuyer at some point, it would come quite late and at a price most of them may not be even capable of paying.

However, the fact that there are forums such as the Real Estate Regulatory Authority (RERA) and the National Company Law Tribunal (NCLT) they could approach to get their grievances addressed has been instrumental in boosting buyers’ confidence, to some extent. Data available with PropTiger.com show home sales in 2018 increased 23 per cent when compared to 2017 on improving buyer sentiment.

Cutting deep

If developers made the grave mistake of assuming they could dethrone the consumer from his king’s seat when all was thriving in India’s real estate and buyers made a beeline to book their dream homes, they can only repent now. Unfortunately, some of them will have to compensate for making that mistake by losing their very existence and stand no second chance to correct the situation.

Anyhow, “cutting” is oftentimes seen as the ready solution for all problems. Promptly then, some 'slashing' moves was made to improve buyers’ sentiment. If home-buying decisions were purely driven by ‘affordability’, home sales would have increased substantially in the first of 2018, when interest rates were at a record low and builders were showering discounts in a market where rates have largely remained flat in the past five years. Since that did not happen, it is safe to say that in a positive market, where the buyer is certain he will get what he wants and when he wants without any fears of losing money, he would not shy away from paying a little more. They did exactly that when rates were rising during the real estate boom in the start of this decade; till then, buyers were unshaken in their confidence in real estate. If developers expect their condition to improve in the New Year by regaining the lost confidence, they will have to show greater seriousness in delivering what they promised. And, more importantly, they will have to be acutely watchful of their words lest they fall to making claims that they would not be able to deliver.

If they are working hard now to complete their ongoing projects (around 8.78 lakh units are likely to be delivered by the end of 2020), India’s now-watchful builders are also exercising caution in launching new housing projects — new launches in nine markets are likely to fall 22 per cent y-o-y; in 2016, they fell 43 per cent. The numbers are likely to fall further in 2019, when the country goes to polls.  That is a wise step since it is high time India’s builders walked the talk.

A word to the wise! Since other sources of funding might be drying up amid a liquidity crisis in non-banking finance companies, homebuyers are realtors' only hope.