INDIA (DOMESTIC FIRMS): An Introduction to Real Estate: Mumbai-based

Real Estate Landscape in India 

India is poised for USD5 billion dollars of economic growth over the course of this decade. With this in mind, the Hon’ble Prime Minister Mr. Narendra Modi has placed emphasis upon the housing industry. His vision on housing coupled with development of infrastructure all over the country connecting metros like Delhi and Mumbai and even smaller towns with highways. The coastal road and Atal Setu in and around Mumbai have helped in easier commute and stabilisation of land prices. The development of waterways is also on the anvil and the government is trying to give this industry a big push by offering tax breaks and other incentives. All these infrastructure projects undertaken by the Government in recent years are today operational making movement around the Country as also to nearby areas convenient and cost effective.

New destinations such as Andaman and Lakshwadeep islands have bene opened up for tourism. The Government has also positioned India for religious tourism with the development of Ayodhya and surrounding areas. The Government has fuelled the development of the GIFT City near Ahmedabad, which has raised demand of real estate in Ahmedabad and surrounding areas.

These developments on the political front have fuelled demand for second homes and holiday destinations as also decongestion of the crowded cities.

SWAMIH Funds 

The Government has continuously, since the outbreak of COVID19, promoted the SWAMIH Fund. The Fund has made large investments in stuck affordable housing projects thereby tackling both - the problem of housing and the problems of bad debts suffered by institutions lending to such projects. Also, the completion of these projects has ensured liquidity to developers, home buyers and lenders all of whom were stuck in these projects.

The Real Estate Regulation Act 

The Real Estate Regulation Act brought about for the protection of home buyers has stabilised over the last few years. The Real Estate Authority has successfully set up its offices in different locations in the country thereby increasing its reach. Tribunals are well equipped to deal with the issues arising out of the development. The increased compliance under this Law has ensured that developers undertake only feasible development and complete the same on time.

The RERA Authority has now started taking proactive steps to identify defaults in real estate projects and in some cases also identify stress prior to there being a default so that corrective action can be taken prior to a default taking place. The Authority employs consultants including the Big 4 Accounting Firms to assist them in such matters. The authority has been using artificial intelligence tools to enable them to deal with the growing number of projects.

The newly introduced insolvency laws have seen a number of projects, which were heretofore unviable, being resolved under the new mechanism, which balances interests of banks and home-owners alike. This law has again evinced the interest of investors and developers looking for a good deal. While such resolutions are relatively complex, the development of this field holds a promising future for the real estate sector in India. Although the rules of the game are still being tested, it is clear that everybody should take a reasonable stand for the resolution to go through.

REITs 

With the growing interest in real estate, the Government has supported the setup of REITs in India. To meet with the demand from small investors, provisions have now been introduced for setting up of a smaller REITs.

With this political and legal foundation in place, acquisitions of new land parcels are the order of the day. Large developers are acquiring these land parcels on a joint development basis thereby reducing dependence on upfront cashflows of acquisition of land. This is true for commercial and also residential spaces. This has made projects lighter on costs and cash flows ensuring smooth completion.

At the same time, owners are greatly interested in being a part of the journey of growth associated with the lands themselves owned thereby making it a win-win proposition for the developers and owners alike. Owners and developers of commercial structures are actively discussing the possibility of transferring the structures to REITs.

Additionally, large funds with deep pockets are purchasing these lands for full value by making down payments so that they are free then to deal with the development as per their business plan and without being constrained by documents on manner of development.

A recent survey leading up to awards in real estate being given out by a prominent News Channel resulted in applications from all over the country. Developers enthusiastically participated even from Tier 2 cities and submitted their competing projects in different segments. The luxury segment was filled with entries from Tier 2 cities including the northeast. The jury members who had visited these projects lauded the efforts of such Tier 2 developers for setting up exemplary projects even in small towns.

Similarly, branded holiday homes are the order of the day. Large hospitality brands have rolled out different schemes for promoting such residences.

Mumbai 

This discussion is incomplete without reference to the Real Estate Capital in India, Mumbai City. With the Maharashtra Government giving emphasis to self-redevelopment of existing condominiums, this sector has also seen development activity pickup in the City of Mumbai, which has some of the most expensive real estate in the country. The self-redevelopment proposal has enabled growing families to have larger houses without spending a fortune to stay together in the same locality. This is definitely a boon for an Indian society which has a lot of takers for joint family living.

The Real Estate Industry in India is on an upswing and holds a promising future for all its participants in the coming few years.