Expectations Vs. Reality

How real estate startups will be a game-changer for the economy?

-  Yash Garg and Vivek Garg, Founders of Cube Homes

Real estate sector in India is expected to reach a market size of US$ 1 trillion by 2030 from US$ 120 billion in 2017 and contribute 13 per cent of the country's GDP by 2025 as per India Brand Equity Foundation. Retail, hospitality and commercial real estate are also growing significantly, providing the much-needed infrastructure for India's growing needs. The Indian real estate sector has witnessed high growth in recent times with the rise in demand for office as well as residential spaces. Private equity and venture capital investments in the sector have reached more than US$ 1.50 billion in 2019.

According to data released by the Department for Promotion of Industry and Internal Trade Policy (DPIIT), construction is the fourth largest sector in terms of FDI inflows. FDI in the sector (includes construction development and construction activities stood at US$ 41.53 billion from April 2000 to December 2019.

Looking at the current situation, the impact of the Coronavirus has been significant on all sectors of the economy including the real estate market in India. Coronavirus came at a time when the markets had finally volleyed and were showing a recovery from the past few years. Interest in home buying was back, and the real estate market was showing signs of recovery and upswing. The Covid-19 lockdown further threatens the housing sector that has already seen a rise in unsold inventory of houses across leading cities in the country. Even as there are portrayals of doom and gloom, there is an opportunity and silver lining across all this that will ultimately bring about significant changes in the real estate market and change it for the better.

While we do foresee market sentiment being low, developers also need to understand the sentiment of the buyers. While demand is still there, buyer sentiment might be low in the short term. The demand for top-end or luxury apartments might witness the greatest dip so far, as people focus on value for money buys. A lot more demand will be seen in the first-time home buyers segment as well as the mid-priced segment, especially for builder floors that can be complete units in themselves.

The main concern as of now, more than price, is the timeliness of delivery and the quality of the product. There is a need to bring in better quality products with quick delivery turnarounds for market sentiment to return back slowly. Builders should currently focus on finishing existing projects as there is also a lot of excess inventory in the market currently. It is the best time to be conservative and focus on market and consumer sentiment, as opposed to launching new projects and trying to lead the market. It is also a time to be optimistic and understand that long term returns will be around for those who course correct and maintain the status quo as of now.

We expect real estate startups will be a game-changer for the economy as the subsequent decade witnessed the emergence of an unprecedented number of real estate startups whose innovations are intentionally or unintentionally changing the face of the industry forever. Proptech will uplift the growth of real estate as it involves the application of technology to provide solutions and deliverables in the real estate sector. More precisely, this term is used for technology which is used to offer services in real estate to buy, sell, rent, develop, market and manage the property efficiently effectively. Proptech will revolutionize commercial office space in a big way.

While real estate professionals all heard about Proptech a few years ago, it is still very much in its infancy. There is increasing awareness of how technology is transforming the real estate industry, but companies are also starting to understand why the digital age is also as important as updating with technology. Hence, we can foresee a bright growth in the future in the real estate market in India.

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