“2018 was a moderate year for the real estate sector with various external shocks like demonetization, RERA and GST affecting buyer confidence across markets, even though the longer-term impact of these regulatory measures was seen to be largely positive. The preceding quarter also saw an IL&FS default resulting in a liquidity crisis for the financial markets, most particularly impacting HFCs and NBFCs alike. This posed a new challenge for the real estate business that has a high dependency on the availability of liquidity to fund the liability side of most lenders.
Against this backdrop, 2019 is likely to start on a moderate note with the sentiment remaining muted in the run up to the upcoming general elections. Today, 70% of the housing finance book by value is attributable to a few metros that primarily include Mumbai, the NCR, and Bengaluru. Most of the HFCs will have to wait for a rationalization of prices to drive growth whilst also looking beyond Tier I markets where housing units are still affordable. Along with the government and regulator’s efforts to revive the real estate sector, developers will also look to come up with multiple promotional offers and subvention schemes that are focused on driving a purchase decision amongst the salaried class.”