Firms in India’s realty sector a ray of hope for better days next year

V Nagarajan, Gulf Today

India’s realty sector is hoping for better days in the year ahead. A combination of factors ranging from sluggish demand and impact of global slowdown have dented the realty markets though commercial space absorption has defied odds for the past four years.

Over 72 per cent (approximately $47 billion) of the total loans advanced to Grade A builders ($65 billion) are safe and stress-free. Grade B and C developers collectively accounted for just $28 billion of the total advances, according to Anuj Puri, Chairman, Anarock Property Consultants.

While commercial office real estate flourished and remained the top-ranking real estate asset class, residential sector continued to struggle under the funding crunch and slow annual sales growth. Other asset classes like co-working, logistics & warehousing, co-living and student housing gained traction in 2019, attracting slow but steady investments (collectively $210 million).

As per Anarock research, housing sales value of India’s top nine listed players touched Rs108 billion in the second and third quarters of 2019, amounting to a 5% q-o-q growth. While RERA registrations gained 40% growth, the government has announced several measures like reduction in GST rates to 5% for under-construction projects, reduction in repo rates by a significant 135 bps, creation of an alternative investment fund of Rs25,000 crore for last-mile funding of stalled housing projects, cut in corporate taxes and relaxation in FDI norms for single-brand retail.
Of the estimated 2.3 lakh new unit launches in 2019 in the top seven cities, nearly 40% or approximately 92,000 units were in the affordable segment, followed by mid-segment with a 33% share.

The luxury and ultra-luxury segments accounted for the least share with 10% (approximately 23,000 new units).

According to Anarock data, by December-end, office supply in 2019 will have risen by 13% against 2018, touching 43.3 million sq. ft. this year as against 38.2 million sq. ft. in 2018.  Absorption will have seen a 11% yearly growth in 2019, to touch approx. 37 million sq. ft. and thereby reaching 2015 levels. 

Commercial spaces continued to attract maximum PE investments, totalling close to USD 3 billion funds in the first three quarters of 2019. In the corresponding period of 2018, total inflows within this segment equalled nearly $2.1 billion, thus rising by 43% in a year.  India’s top eight cities like Bangalore, Chennai, NCR, MMR, Hyderabad, Pune, Ahmedabad and Kolkata together saw new supply of nearly 28 million sq. ft. of Grade A & B logistics and warehousing space in 2019.  Of this, nearly 20 million sq. ft have already been leased by various players.

On the flip side, the top seven cities saw retail leasing activity drop by 35% in 2019 over 2018 - from 5.5 million sq. ft. in 2018 to 3.6 million sq. ft in 2019.  The current trends indicate that H1 2020 will not see much growth over the patterns of 2019. However, the H2 does hold promise as the positive impacts of various government measures will trickle in.

I am planning to sell my residential and commercial units in Pune. What is the TDS rate while selling the property in India by an NRI? Sanjay, Sharjah.
In the case of an NRI seller, the tax deductible at source (TDS) is 20 per cent, irrespective of the sale amount. In other words, TDS is mandatory for deals with NRI sellers, even if the terms of the sale specify the selling rate below Rs 5 million. The TDS will be adjusted in the tax payable and the buyer has to furnish Form 16A to the seller as proof of tax deducted and paid on behalf of the seller.

I had acquired immovable property in Indore as a resident and intend selling now and repatriating the sale proceeds. Is permission needed from any authorities?  Dharmadev, Dubai.
You can sell the property and credit the proceeds in NRO account.  You can repatriate upto $1 million per financial year, subject to the compliance and satisfaction of documents to the authorised dealer and payment of applicable taxes.

My relative is planning to gift a commercial property located in Bengaluru.  She is a PIO and settled in Canada. Are there any restrictions in this regard?  Anand Ram, Dubai.
There is restrictiion at all as the Reserve Bank has given general permission to Persons of Indian Origin to transfer residential or commercial property in India by way of gift to a person resident in India or to a person resident outside India, who is a citizen of India or to a person of Indian origin resident outside India.