Sea-change Mumbai: Infra will de-congest prime areas, says CBRE

Bizbuzz reached out a cross section of the realty industry to find out their take on the state of the business. Here are the responses:

Prime locations will see decongestion, says Abhinav Joshi, Head of Research for CBRE India.

1.   How was the year gone by for the real estate/infra industry – in terms of sales and new project launches. Can you please list a few launches and the category of projects – luxury, affordable etc., - and the locations?

With the impact of the policy initiative subsidizing in 2018, supply and demand for the year was inching upwards with a y-o-y increase of about 15 % (supply) and 13 % (demand). In fact, 2018 saw demand to be marginally stronger than the new supply additions which indicates the revival of this segment. While the recovery was at site, the year witnessed crisis of Non-Banking Financial Company (NBFC) sector a main source of funding for residential developers, resulting in fund crunch for the developers. Over the years, affordable and mid end segment were contributing to about 80 % of the supply and demand. However, the share of affordable segment in terms of supply/demand has been increasing backed by government initiatives and strong end user demand. 

2.         Do you appreciate the point that infrastructure development is important for the growth of realty? What according to you are key infra issues that weigh the customer’s mind while looking for a house?

Robust infrastructure plays a major role in determining the real estate investment. Hence, property prices close to infrastructure such as roads, railway stations and airports are significantly higher than in other areas and buyers are are ready to pay for the privilege of living close to these conveniences, as it saves them both commuting time and expenses. From a real estate market perspective, infrastructure implies both physical infrastructure such as road connectivity and also social infrastructure like schools, hospitals, shopping malls, post offices and other essential government services, and facilities of leisure activity such as sports complexes, swimming pools, parks and gardens, etc.

3. The government has initiated several infra projects such as metro, coastal road and BVSL. Do you agree that these will help create a positive sentiment for realty industry?

The slew of various infrastructure projects will improve connectivity and decongest the prime locations of the city. It will also significantly impact the property prices in the vicinity besides giving a fillip to the demand for commercial and office spaces in the area. Thus, these infrastructural developments can be a game-changer for the realty industry.

       4.     Specifically speaking, please mention the area wise - impact of the following:

a.     Mumbai Metro projects

b.     Coastal Road

c.      Bandra Versova Sea Link

a) Mumbai metro project will be a game-changer for the city. Not only will it improve connectivity, reduce travel time and transportation cost, it will also impact the real estate sector in a significant way. It will impact the capital values of residential localities in the proximity, along with the increase in demand for offices and retail spaces.

b) The coastal road will be a step forward in ushering an integrated transport system which will ultimately benefit the public-transport system. It would ease connectivity across the city by serving as a ring road. However, environmental impact of this project should be thoroughly evaluated before it.

c) The new corridor is posed to disrupt the entire Mumbai real estate market as it would be a shot in the arm for connectivity between the suburbs and the main commercial business district. It will reduce travelling time to 12 minutes from 60 minutes. Due to improved connectivity from the farther suburb, the crowded areas of Andheri, Chembur, Ville Parle are expected to be decongested and the excessive pressure on the express highways would be relieved.

5.Do you expect the prices to go up in the next three to five years? If yes, by how many percentage points?

Asset pricing to remain steady albeit key locations: Pricing will be one of the key factors for the projects to be successful. With limited speculative buying, developers will be cautious with pricing resulting in stable capital values in 2019. However, ad demand increases, the locations with basic physical and social infrastructure is expected to witness higher appreciation in next 3-5 years. 

6.Has the industry seen any correction in last couple of years? If yes, by how much?

Over the last two years, the policy disruptions reduced the number of launches and developers were focusing on realigning their business models and clearing their unsold inventories. The developers were also offering discounts and subvention scheme for prospective years.

7.Has RERA helped in bringing about or improving transparency?

The implementation of RERA has ushered in a regime of transparency and accountability and weaned away fly-by the night developers to a great extent. Currently 28 states and union territories have notified rules under RERA and 15 of these have established a permanent regulator, the latest one being Delhi, which appointed a full-time regulator in November. As of November, more than 34,000 projects had been registered under RERA.

The year 2018 has been a positive year for real estate as the market started reviving from the short-term disruption caused by introduction of key policy reforms such as RERA, GST and demonetization introduced in 2017.

8.Do you feel this is the right time to buy?

The Indian real estate sector is undergoing recalibration post one year after the implementation of key policy reforms. The implementation of RERA has reduced fear of project details and the unified tax regime under GST has weaned away uncertainty and led to positive investor sentiment.  This is  thus an opportune time, especially for NRIs, to purchase property back home.

9.      One line on how do you of the New Year will pan out for realty/infra industries since the construction industry contributes handsomely to the GDP?

Propelled by strong market indicators such as India’s robust growth rate of 7.4 percent (according to IMF forecast) and a positive investor sentiment, we foresee the real estate sector to sustain the momentum in the forthcoming year with the commercial space being the key driver of demand led by BFSI (Banking, financial services), manufacturing and other sectors.