10 Things That Developers Will Focus On In 2018
In 2017, the real estate sector witnessed many policy announcements to be complied with. Come 2018, many expect that the year will not be filled with surprises. In fact, it is going to be a year when the developers will have to prepare themselves for an increase in housing demand. However, given that policies announced in 2016-17 have affected big and small developers alike, such stakeholders would need to reinvent and repackage themselves to be appealing to prospective homebuyers. Here's what developers would be doing in 2018:
Addressing pain points
There will be no room for a defaulter in the New Year. If circumstances do lead to defaults, a developer must be ready to pay a sizeable amount as penalties. A developer, who is ready to ensure quality constructions, would definitely steal the pie. With Real Estate Regulatory Authority (RERA) active in most states, inordinate delays would be pulled up but not just that, it might impact the brand image of the defaulting developer, apart from the penalties. So, it becomes imperative for the developers to roll-out well, promise what they can offer and maintain the timelines. Fastracking the completion of ongoing projects would address the issue of inventory overhang in most cities.
It must also be noted that with the death of pre-launch and the gap that developers usually got leading up to the official launch, the gestation period of a project would be much higher than before.
See them pricing right
Well, we are not saying that prices would go down, which is impossible taking into consideration the many compliance costs that have been introduced after the implementation of the real estate law and the Goods and Services Tax (GST). These structural reforms would work out as a protective layer in the real estate sector, where deviations would be pulled up. Prospective homebuyers can be assured that RERA-registered developers have no leeway in defaulting and in a competitive market, developers would have to mind their product pricing.
Adopting industrial construction techniques
Pre-fabricated homes, pre-engineered buildings, modular homes and tunnel framework technologies may become a point of interest for developers. These building techniques can help developer fast-track the construction, ensuring that they don't falter the delivery timelines. There would be a greater emphasis on delivering quality, making new technologies popular.
Investing in project management
More real estate companies would be seen investing in project management teams. Not that this concept did not exist before, but dedicated teams would aid developers to pinpoint the highest priorities. It would act as a point of contact where the single-point agenda would be to deliver the best, faster. The team would also need to analyse the risk quotient as well as compliance parameters. In short, there would be an in-house watchdog to oversee consistency and compliance with the various policies and way forward.
Calling out for structural changes in terms of NPAs
Despite having one of the lowest Non-Performing Assets or NPAs, the Reserve Bank Of India guidelines have assigned a risk weightage of 1.5 per cent to the sector, which acts as a major deterrent given that banks do not like lending out to the sector because of the risk weightage. Developers have already started asking for reforms. Data suggest that bank lending reduced drastically from 57 per cent in 2010 to 24 per cent in 2016.
Calling out for new economic centers
Prospective homebuyers are looking for affordable housing and land is scarce. Developers would be seen asking the government to aid the creation of new growth corridors in the peripheries and suburbs so that there are enough takers and the pricing is suitable. In 2005, the Special Economic Zone (SEZ) policy was a welcomed intervention but the Minimum Alternate Tax (MAT) was a blow to the developers who were charged at 18.5 per cent. At present, there are 204 such SEZs, and Budget 2018-19 is keenly awaited to understand whether there would be such exemptions. New centres that give tax reliefs to developers would be a good way to ensure that as the city centres get saturated, there is enough land in the peripheries to support affordability.
Migrating to asset classes
This is not new to real estate, but, 2018 will see more of it. Mixed-use developments are becoming increasingly popular among homebuyers and tenants. As developers work on increasing their presence across cities, many formats may gain ground – branded homes, serviced apartments, retail zones, SEZs, integrated townships, luxury homes, etc. Pricing would be a determinant though when we talk about sales.
Asking for reforms in FDI
While private equity funds are increasing, foreign direct investments (FDI) have diminished over the past few years. The New Year will see real estate developers asking for reforms in FDI norms. The FDI remains a crucial source of funds but the government's easing of norms for building townships, housing, construction development projects and built-up infrastructure has not played out significantly. In 2018, there would be a focus on this as well.
Rental housing stock
Early 2018 may not see much development in the rental market, but, towards the end of the year, formal rental housing stock could be a subject of discussion. This becomes important because as we inch towards 2022, which is the year to fulfill the Centre's vision of Housing For All, the realisation hits harder the target set is high. Rather than plain building, developers would be seen talking about the development of formal rental housing stock especially in big cities that are open to large-scale migration from rural centres.
The need for streamlined approvals
Well, the real estate law would be an incomplete venture if single window clearances are not introduced at the earliest. Discussion within the industry circle is largely about the impact approval delays have on project cycle. A single-window system that connects various stakeholders – that is the Centre, the states, the urban local bodies and supported by robust technology would address the complexity of this issue. In 2013, a committee on Streamlining Approval Procedure for Real Estate Projects had recommended such a development. It may be time for the government to mull over this.