Technology To Show The Way As Pressure On Builders To Execute Rises: REMI's Bilkha

The year that is going by has brought about a change in the real estate sector. While 2017 was a year when the sector faced a setback, the stakeholders are now ready to witness a positive change in 2018. In an interview with Sneha Sharon Mammen, Shubika Bilkha, business head at the Real Estate Management Institute (REMI), expresses similar sentiments.

Edited excerpts:

Mammen: What makes you feel positive about real estate in 2018?

Bilkha: The real estate sector has witnessed the introduction of many new policies over the last few years. The government's thrust on urban development and providing housing to all by 2022 is clearly visible. The government is now focussing on attracting additional capital, increasing transparency and boosting the sector across all its key stakeholders through its policy initiatives.

In 2014, the focus of the government was on increasing capital within the sector with the introduction of Real Estate Investment Trusts (REITs) and amendments to the Foreign Direct Investment (FDI) policy, allowing 100 per cent through the construction route. In 2015, policy focused on urban development and the housing agenda with the introduction of the Smart Cities Mission and the Pradhan Mantri Awas Yojana (PMAY) with the aim to build 20 million affordable homes by 2022. In 2016, the government's focus moved on to increasing transparency and reducing the prevalence of the shadow economy with amendments to the Benami Transactions Act and the demonetisation initiative. Lastly, 2017 saw the real estate sector undergo a complete overhaul with the introduction of the real estate law and the Goods and Services Tax, and the tag of infrastructure status given to the affordable housing segment.

Mammen: What are your thoughts on the year going by?

Bilkha: For real estate companies across the segments, the last one year has been transformative. The operating framework that was seemingly outmoded in its outlook was banished almost overnight, making way for the new regime to prevail. Companies had to gear up to change their working models, organisation structures, understand how to get their vendors to comply, ensure their employees were trained in line with the new regime, appease their customers who now had a lot of protection under the Act, while still running a successful business.

This has not been an easy feat, and only a few players have continued to thrive and survive during these challenging times. For the others, consolidations and joint arrangements continue to be the modus operandi.

Mammen: What changes in the strategy are we likely to see in the New Year?

Bilkha: As the real estate sector metamorphoses into a tightly controlled and regulated industry, the onward journey will continue to see real estate companies looking inwards to build enhanced delivery capabilities while keeping a keen eye on newer business models that emerge and their own five-year vision for their enterprises.

Real estate businesses will focus on using newer technologies on-site and at the planning stage, employing effective cash flow management techniques, get better at project management and quality control, and overall take a more structured approach towards development. This is how real estate businesses around the world have flourished and attracted larger pools of investment capital.

Mammen: Will there be a change in the buying sentiment in 2018?

Bilkha: At the market level, the new operating framework is expected to lure consumers back into the system. Recent reports have indicated that 1.6 lakh units were sold between the first quarter of the financial year of 2017 and 2018 and the third quarter of the same year. During this period, unit sales exceeded new launches. The trend of limited new launches and disposing the excess inventory will continue through the course of 2018, where a marginal sales recovery is expected in the residential market. It continues to be a buyers' market after all. For those who struggle to sell, innovative leasing models might help meet some cash flow requirements in the interim.

The government's thrust on the 'Housing for All' agenda supported by the National Housing Board's (NHB) initiatives such as the Credit Linked Subsidy Scheme (CLSS), to include a larger portion of the home-buying segments, has been an encouraging step to bring in additional purchasers and fencesitters. The declining interest rates have also been a key contributor to this improved sentiment. Affordable housing will continue to be the focus of policy and industry through the next few years, as that is where the real housing shortfall and the need exists.

Mammen: How is the commercial segment expected to fare in the coming year?

Bilkha: The commercial market is expected to continue to garner traction through 2018 and newer business models such as co-working spaces will continue to see some interest. Real estate companies will start getting more sophisticated about their leasing arrangements and their leasing strategies to attract the right tenant mix. This will prove to be a key differentiator.

Logistics, warehousing, student housing, co-sharing, senior living and leasing will be additional business models that real estate companies will explore as the market dynamic continues to evolve.

With increased transparency and accountability, as well as the policy thrust towards infrastructure, urban development and affordable housing, 2018 should see renewed interest from investors and consumers alike. We also hope for the launch of the first REIT to really give the sector a boost.