Residential Real Estate Will Continue To Be Sluggish, Says ICRA


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    Despite the efforts from the government to boost real estate, the sector will continue to maintain a negative outlook. As per the rating agency ICRA, residential real estate sector will continue to witness liquidity crunch and subdued demand while commercial real estate has a stable outlook.

    Apart from liquidity and demand issues, the residential segment will also see consolidation of market share with larger developers coming out on top. The establishment of a Rs. 25,000 crore-fund for stalled housing projects, may alleviate some of the execution and delivery-related issues going forward.

    The sales in the sub-Rs 50 lakh segment have witnessed considerable momentum and given the government incentives for development and off take of affordable housing units, positive trends in both demand and supply for this segment are expected to continue going forward, Money Control reported.

    Further, with homebuyers increasingly leaning towards reputed, trust-worthy developers with an established track record of on-time and quality project delivery, such players have also been registering healthy sales and project launch levels beating the overall sluggishness in the industry. The market share of such developers has been increasing and will continue to trend.

    However, the prevailing liquidity crunch, high inventory overhang especially in Delhi-NCR, Mumbai-MMR and Pune resulting in continued over-supply, weak affordability and subdued demand conditions will continue to keep the residential sector in the slump. Moreover, the inventory stock in now going to ease anytime sooner. Most of the unsold inventory comprise either units with high ticket sizes or units located in peripheral areas with weak network infrastructure.

    On the other hand, commercial real estate segment has been fairly stable. This segment was seen less impacted by the liquidity issues as demand for office space has been resilient on the back of expansion and consolidation plans of various multi-national and domestic corporations.

    Most of the tier 1 markets have witnessed stable or increasing absorption of office space during 2019 as compared to 2018. Partly on account of the upcoming sunset date for SEZ benefits in March 2020, markets such as Bengaluru, Hyderabad, Delhi-NCR and Mumbai witnessed increased completions during the year.

    Pointing to the industrial warehousing and retail mall segments, ICRA pointed out that they have also benefited from stable demand profile from occupiers and favorable investment outlook. The demand for industrial warehousing, in particular, has been driven by large scale expansion of warehousing and logistics facilities for e-commerce segment.


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