RESURGENT INDIA KNOWLEDGE SERIES PRESENTS
Webinar on “Future of Real Estate"
Speakers: Mr. Getamber Anand, CMD- ATS Infrastructure Limited
Speakers: Mr. Sumit Dabriwala, MD- Hiland group
Moderated by- Ms. Sonal Mehta, VP-Resurgent India Limited
♦ Real Estate as a sector was already going through a slump pre-COVID-19.
♦ The future of commercial real estate with respect to work from home culture.
♦ Few trends that may prevail amidst the Covid-19 outbreak.
♦ Delays in construction activities to impact supply
♦ Reduced demand
♦ Rentals to come under pressure.
♦ Multiple government initiatives to revive the depression in the economy and its impact on the Real estate- Lowering of the repo and rev repo rates. Reduction of CRR .3 months of the moratorium for all the loans.
⇒ Indian Economy has been facing several challenges in terms of new policies like GST and has been experiencing a liquidity crisis to which real estate is no exception.
⇒ Infrastructure propelled the growth after the great depression in the early 40s. Real estate can be determined as a part of it. Real estate and construction stand second to agriculture in generating employment. The majority of the industry experts and bureaucrats are of the opinion that low hanging fruit that could engine the economy would be agriculture, construction, and infrastructure- in which real estate can be classified.
⇒ Real Estate has proven to be more secure than any other asset class given the current situation. Uncertainty is stricken with panic which gravitates large financial investors and even retail investors to safe-haven assets like gold and real estate. This tendency has been repeated historically.
⇒ Despite the market condition, if promoted correctly, can prove to be a great opportunity. However, loss of a job can hinder the demand side of the asset but even that can be resolve if HFCs take open-minded approach to the situation.
⇒ Technology over the decade has leapfrogged. Work-from-home which was a small whisper in tech and IT companies has transformed into reality. It will gain more traction once various substantial issues like, data security, productivity monitoring can be tackled. It’s a lingering question as to how it's going to affect the commercial real estate but it can look promising for residential real estate.
⇒ If work-from-home becomes a new normal and culture for professionals, it will be consequential to not only commercial real estate but also transport as a sector. Residential real estate will pick up momentum given the Indian psyche to own a house although rental housing is doing fairly well on the market. The only challenge is to identify the right ticket size, apartment size, and geographical location.
⇒ Indian Real estate/infrastructure will become an attractive market for domestic as well as international investors post COVID-19 situation. It’s believed that it will be in better shape than any other sector because of demand for it and cheaper capital floating around the world.
⇒ The construction halted at the moment will kickstart with the return of the labor. The other challenge that may obstruct the pace is the supply chain of raw materials for construction for which CREDAI will have to take some crucial and prompt decisions. Cement and steel will not be a challenge.
⇒ Cheaper capital made available to the developers will further enhance the growth of the sector and the government is making informed and educated decisions on it. NBFC’s will also have to fall in the same line.
⇒ Real estate developers are bringing about internal change and honing their skills in terms of the way they have been looking at the procedures historically and viewing the situation with a critical eye to prepare themselves for the new opportunities in the face of disaster.
⇒ Due to reduced interest rates, banks and HFCs can initiate a tectonic shift in-country if cheaper capital is made available to the homebuyers which will not only change the real estate businesses but concurrently another stack of businesses closely associated with real estate. It will be interesting to see how the government harvests this opportunity.
⇒ To tide over the challenge of the effect of looming slow turn in airlines and other sectors that coincide with real estate, RBI and the ministry of finance have generally instructed PSU banks to extend an additional 10-15% of working capital to businesses. NBFC’s lack liquidity but that can be routed if a bank borrows via LTR and raise bonds for NBFCs and provide them cheaper money. No expectations of cash inflow for another 6 months from the customers.
⇒ No damp in the demand of the residential real sector as such if HFC’s come up with a product that addresses the issue of job loss of the homebuyers, reduced interest rates and if the developer has the capacity and historical performance of execution.
⇒ Inventory that has been relevant in the market never stopped selling out and will continue to sell out. Stack of unsold inventory also includes high-end real estate, wrongly configured, wrongly priced real estate etc.
⇒ There will be delay in the project timeline due to prevalent situation.
⇒ There won’t be much inflexibility in work due to stalled imports of raw materials from china because not much was procured from Chinese industries, there is a dialogue going on to not buy from china which will prove to be a favorable time for domestic industries and great push for our MAKE IN INDIA initiative.
⇒ Restructuring packages by the RBI to aid industries. Even banks are vying for it to not deteriorate their books further. On totality positive outlook by the regulators to overcome this crisis
⇒ Relaxation in penalties and charges are inevitable because of the demand of the situation.
⇒ Equity money in form of FDI and sovereign investment will be flowing in because of domestic demand in the sector.
⇒ There has been a robust growth in the industrial and manufacturing side of the economy but there isn’t enough evidence to points that there may be migration of manufacturing units from china to India. If GoI gives a push in the right direction there is an opportunity for industrials parks setting up with mixed use licenses.
⇒ Work-from-home style of working will spur the way we configure home and it will be interesting to see how it pans out in the upcoming years. Its going to be net positive for residential real estate.
⇒ Lenders will be less averse lending to real estate because of foreseeable sharp rise in the investment to this asset class.
⇒ GoI has given real estate projects that are 50% homes and 60 sq.meters are infrastructure status. Steps being taken to push government to give real estate as a whole infra status which will enable the industry to get cheaper money and other advantages.
⇒ Rupee depreciation will be less in the foreseeable future which will deliver lower cost of capital from overseas from a financial engineering standpoint. This instigates flow of significant liquidity going forward in the economy which will impact the pricing of the capital in domestic market accordingly.
⇒ It’s too early to tell if big real estate giants will venture into home financing.
⇒ As far as hospitality is concerned, businesses who owns their customers will be in great shape. Temporary road block of 3-4 months for businesses that are rich in customer loyalty will not face any severe effects. They will bounce back and grow rapidly. But if brand lacks the asset of customer loyalty then it will face the challenge and this holds true for businesses across industries and every brand.
⇒ Real estate market is mostly end-user-driven market. So, for developers targeting those kinds of audience there is plenty of opportunity. Although for second-type real estate as a second investment it might not be lucrative because of illiquidity which may continue for another year or two.
⇒ Co-working space can be help business expand at good times by acquiring or leasing more space in terms of sq. feet and degrow at difficult times and consolidate spaces. Mostly, this trend of co-working space is going to be there.
⇒ REITs are a dynamic tool of investment and impending clarification on income tax has been cleared. Couple of REITs in the market have demonstrated themselves and are trading positively. Considerable amount of pool of capital will be supporting retail assets and commercial assets like these. This trend is very likely to accelerate in upcoming years.
►Watch the webinar here : https://www.youtube.com/watch?v=LgpqAgo7_D4