India Real Estate Market Outlook 2019 - R9Ol PDF

C B R E R E S E A R C H | I N D I A
REAL ESTATE
MARKET
OUTLOOK
INDIA
TABL E OF CONTENT
04 05
EXECUTIVE SUMMARY ECONOMIC OUTLOOK
13 21
OFFICE SECTOR RETAIL SECTOR
28 35
LOGISTICS SECTOR CAPITAL MARKETS
41
RESIDENTIAL SECTOR
CBRE RESEARCH | © 2019 CBRE, Inc. I NDI A REAL ESTATE MARKET OUTLOOK 2019 | I NDI A
2
EXECU TIVE SU M M ARY
2019: CHANGE TO BECOME A NEW NORM
1International Monetary Fund (IMF)
4
ECONOMIC OUTLOOK
GDP GROWTH TO CONTINUE
ECO NO MIC OU TLOOK
FACTORS THAT WILL SHAPE THE INDIAN

ECONOMY IN 2019
6
ECO NO MIC OU TLOOK
Figure 1-1: GDP growth rate
8.5
8.0
% Growth (Y-o-Y basis)
7.5
7.0
6.5
6.0
2014 2015 2016 2017 2018 2019F 2020F
Source: IMF, January 2019
Figure 1-2: Key interest rates

7.00
6.00
5.00
4.00
(Rate)
3.00
2.00
1.00
0.00
May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19
Repo Rate Reverse Repo Rate RBI Mid-term Target 2018
Source: Database of Indian Economy, Reserve Bank of India (DBIE - RBI), January 2019
7
ECO NO MIC OU TLOOK
Figure 1-3: 2019 Summary of expected global fiscal and monetary policies
Source: Oxford Economics, CBRE Research, Q4 2018
Figure 1-4: Consumer Price Index (CPI) and Wholesale Price Index (WPI) movement
6.0% 5.5%
5.3% 5.2%
4.6%
5.0% 4.5%
4.0% 3.5%
4.2%
(% change)
3.0% 3.7% 3.7% 2.8%

3.4% 2.9%
2.6%
2.0%
2.3%
2.1% 2.0%
1.0%
0%
Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19
CPI Headline(%y-o-y, Base: 2011-12) WPI (% y-o-y, Base:2011-12)
Source: Office of the Economic Advisor, October 2018; DBIE -RBI, December 2018; *Provisional numbers
8
ECO NO MIC OU TLOOK
POLICY STIMULUS
Figure 1-5: INR versus USD – exchange rate movement
76.0000
74.0000
72.0000
INR / USD
70.0000
68.0000
66.0000
64.0000
May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19
Source: Bloomberg
9
ECO NO MIC OU TLOOK
Table 1-1: Policy Initiatives

Policy Initiatives Key Highlights Expected Impact
REIT By 2018, almost all concerns regarding the In Q1 2019, Embassy Group and Blackstone
viability of a REIT launch had been addressed, Group LP launched the country's first REIT, which
making it an opportune time for a REIT listing. was oversubscribed on listing. This is a critical step
towards formalising the funding mechanisms
prevalent in the sector.
FDI in e-commerce, Towards the end of December 2018, the Though the intent of these provisions was to ensure
draft e-commerce government came out with clarifications on the that there are no circumventions around the
policy existing FDI policy on e-commerce. Two key existing policy (specially to gain entries into multi-
points that were enlisted in the clarifications brand retail); however, some of these provisions
were: are seemingly restrictive, particularly for foreign
players. While existing players might have to
• To keep a tab on inventory ownership, it has redraw their business models / future plans; a
been mandated that an e-commerce constantly changing policy may also impact
platform cannot purchase more than 25% of foreign investor sentiment. To ensure a level
the total value of goods (of the vendor) from playing field, there is a need for a comprehensive
a single vendor / its group of companies. In e-commerce policy applicable to both foreign and
other words, a vendor can only sell 25% of domestic players.
its total goods by value to a single e-
commerce player.
• Any entity that has an equity participation by
an e-commerce player cannot sell its
products on the platform that is run by such
an e-commerce player.
• A draft e-commerce policy was floated In
Feb 2019, for industry suggestions wherein
special emphasis was laid on data sharing;
data has been termed as a ‘National Asset’
and a legal and technology framework
proposed for imposing restrictions on cross-
border data flow.
Amendments in RBI’s Revisions to the ECB policy were made in The move is likely to improve the Ease of Doing
ECB (External January 2019, wherein all eligible borrowers Business ranking. Also, to curb the volatility in the
Commercial have been allowed to raise up to USD 750 forex market (because of increasing demand for
Borrowings) policy million per financial year under the automatic the USD for crude oil purchases), the revised
route, replacing the existing sector-wise limits. norms provide special allowances to public sector
The Central Bank has also expanded the list of oil marketing companies.
eligible borrowers and recognised lenders.
GST rate cuts change in GST Rates - Non-Affordable Housing Having a standard tax will allow for simplicity in
definition of affordable compliance processes and should result in limited
housing • 5% on under-construction properties with no tax leakages. There could be an increase in cost
input tax credit (ITC), no GST on completed due to no ITC for developers (particularly for
projects affordable housing projects), however this could be
offset by an increase in sales volume.
GST Rates - Affordable Housing
• 1% on under-construction property with no

ITC, no GST on completed projects
Source: Securities and Exchange Board of India; Reserve Bank of India, DIPP, CBRE Research
10
ECO NO MIC OU TLOOK
Table 1-1: Policy Initiatives (Continued)

Policy Initiatives Key Highlights Expected Impact
Affordable Housing Change in definition of affordable housing: Relaxing the carpet area for affordable housing
means that a significant majority of the country’s
• 60 sq. m. in metropolitan cities (NCR including residential stock now falls in the 1% GST
Delhi, Noida, Greater Noida, Ghaziabad, category (higher in tier II cities, lower for the
Gurgaon and Faridabad), Bangalore, Mumbai major tier I cities), which will augur well for the
– MMR region, Chennai, Hyderabad and government’s programme of building housing
Kolkata) having value up to INR 4.5 million for all by 2022.
• 90 sq. m. in non-metropolitan cities / towns
with value up to INR 4.5 million.
Angel tax • The government shall now consider an entity Widening the definition of start-ups (which now
as a start-up for up to 10 years after its includes later stage companies, with a higher
incorporation as compared to 7 years earlier, annual turnover), increasing the exemption limit
provided its turnover for any one financial year on equity investments will give the much-needed
has not exceeded INR 1 billion. boost to mid-sized start-ups.
• Start-ups can apply for an exemption from
angel tax if their paid-up share capital is up to The earlier regime has numerous redundancies,
INR 0.25 billion, compared to INR 0.1 billion stretched timelines, and red-tapism due to the
earlier. procedures, which will now be reduced. It will
provide a conducive environment and enable
quick processes.
100% risk weights In Feb 2019, the central bank announced that The proposed merger of existing categories
removed for Non NBFCs’ risk weights will now be as per their rating, would reduce, to a large extent the complexities
Banking Financial which is a positive development for higher-rated arising from multiple categories and also provide
Companies (NBFCs) NBFCs. Also, various categories of NBFCs have NBFCs greater flexibility in their operations.
evolved over time pertaining to specific sector /
asset classes - at present there are twelve such
categories. However, it has now been decided to
harmonize major categories of NBFCs engaged in
credit intermediation, viz., asset finance
companies, loan companies, and investment
companies, into a single category.
Foreign Portfolio The central bank announced the removal of FPI While the provision was aimed at incentivizing
Investors (FPI) restrictions in corporate debt. As a part of the FPIs to maintain a portfolio of assets, however it
restrictions review of the FPI investment in corporate debt was seeming that FPIs have been constrained by
undertaken in April 2018, it was stipulated that no this stipulation. The removal of restrictions on FPI
FPI shall have an exposure of more than 20% of its will encourage a wider spectrum of investors to
corporate bond portfolio to a single corporate access the Indian corporate debt market.
(including exposure to entities related to the
corporate). The RBI announced in Feb 2019 that
the provision stands withdrawn.
Source: Securities and Exchange Board of India; Reserve Bank of India, DIPP, CBRE Research
11
ECO NO MIC OU TLOOK
HOW IS 2019 EXPECTED TO UNFOLD?
Figure 1-6: Consumption growth 2018 to 2019
Source: Oxford Economics, CBRE Research, Q4 2018
2Boston Consultancy Group, Feb 2019
12
OFFICE SECTOR
DISRUPTING THE DISRUPTIONS
O F F ICE SECTOR
Figure 2-1: Office sector in India: stronger link between tech, investment, supply and demand
CBRE Research , Q1 2019
14
O F F ICE SECTOR
OFFICE DEMAND 2019: NEW SOURCES OF

DEMAND
Table 2-1: Themes continuing from 2018

Themes Trends
We expect that both demand and supply would continue to be focused towards the most
Polarisation between cities
prominent destinations: Bangalore, NCR, Hyderabad and Mumbai.
Majority of the activity – both in terms of leasing and new supply completions is expected to be
Infrastructure-led growth led by the completion of urban infrastructure, particularly the provision of metro services or major
arterial roads.
With the looming sunset date of benefits for occupiers to expire in March 2020, we expect
Dominance of SEZ’s / tech
heightened activity in this segment for both absorption and development completions in 2019
parks
(Figure 2-2, Figure 2-3).
Technology would continue to impact occupiers and developers, resulting in increased flexibility
Tech driven RE decisions
in decision making and space leased / released.
Source: CBRE Research, Q1 2019
Table 2-2: Themes expected in 2019
15
O F F ICE SECTOR
Figure 2-2: SEZ stock split across cities till 2018 end
Kolkata
Mumbai 3%
8%
Bangalore
30%
Pune
13%
Chennai
15%
NCR Hyderabad
15% 16%
Figure 2-3: Expected vacancy levels across SEZ’s in key cities by 2019
50 25%
40 20%
Vacancy Rate (%)
30 15%
Million sq. ft
20 10%
10 5%
0 0%
NCR Mumbai Bangalore Chennai Hyderabad Pune
Estimated SEZ stock of 2019 Expected vacancy in 2019

16
O F F ICE SECTOR
SUPPLY TRENDS 2019: TECH-TAILORED

DEVELOPMENT PATTERNS
Figure 2-4: Office portfolio growth intentions: APAC vs India
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
Increase by 0-10%
Increase by more than 10%
Reduce by 0-10%
Reduce by more than 10%
Remain the same
Not yet decided
India APAC
Source: CBRE’s India Office Occupier Survey 2019, CBRE’s APAC Occupier Survey, 2018
17
O F F ICE SECTOR
Figure 2-5: Growth of the flexible space segment in India
10
8
In million sq. ft
0
2015 2016 2017 2018 2019 and 2020E
Note: includes leasing by flexible space operators in investment and semi-investment grade office buildings, along with non-office developments
Figure 2-6: Anticipated rising share of net absorption in India
50
Gross Absorption (million sq. ft)
40
30
20
10
0
2015 2016 2017 2018 2019 E 2020E
Share of net absorption
18
O F F ICE SECTOR
RENTAL TRENDS 2019: TAPERED GROWTH
HOW TECH WILL IMPACT THE SECTOR
Figure 2-7: 2019 office supply split across cities Figure 2-8: 2019 Future supply split across segments
Kolkata
Chennai 3%
8% Bangalore
25%
27%
Mumbai
10%
Pune
10%
73%
NCR Hyderabad
20% 24%
SEZ Non SEZ
19
O F F ICE SECTOR
WHAT TO EXPECT
IN 2019?
Interest from global and domestic occupiers is
expected to generate evolved sources of
demand.
Rise in evolved sources of demand and strong

supply pipeline is likely to result in the share of
net absorption to rise.
Lack of readily available supply is likely to result

in rental growth continuing in Bangalore,
Chennai, Hyderabad and Pune. This rental
growth is expected to taper over the coming
quarters.
Rental growth is likely to occur in a few, select

locations of Mumbai and NCR – mainly led by
occupier interest in moving across quality
spaces.
Occupiers are anticipated to reinvent

workplace strategies due to changing nature
of jobs.
Tech enablers such as employee mobility and

free-addressing would continue to improve
workplace designs, building quality and overall
work environments.
Occupiers are expected to increasingly tilt

towards ‘smarter’ spaces, with tech-
enhancements continuing to gain more
importance.
20
RETAIL SECTOR
“CHERISH” RETAIL TO EMERGE STRONGER
RETAIL SECTOR
Figure 3-1: Pipeline set to improve across major cities

5.0
2019E
2018
4.0
2017
In million sq. ft.
3.0
2.0
1.0
0
Pune Kolkata Hyderabad Chennai Bangalore Mumbai NCR
22
RETAIL SECTO R
RETAIL CONSUMPTION EXPECTED TO RISE:

DIVERSIFICATION IN DEMAND
Figure 3-2: City-wise total retail spending in India in 2014 and 2019 (INR billion)
Source: Statista
3India Brand Equity Foundation (IBEF)
4International Monetary Fund (IMF)
23
RETAIL SECTO R
NOT ONLY BROWNFIELD: INCREASING

INVESTMENT APPETITE FOR GREENFIELD
CHANGING THE RULES: AMENDMENTS IN

FDI E-COMMERCE NORMS
Table 3-1: Key investors and their portfolios in India
} Blackstone Canada Pension Plan Investment Board* GIC Private Limited The Xander Group
~6 MILLION ~1 MILLION SQ. FT. OPERATIONAL, ~2 MILLION ~5 MILLION
SQ. FT. PLUS 3 MILLION SQ. FT. UPCOMING SQ. FT. SQ. FT.
*CPPIB
Table 3-2: Key Players and their Portfolios in India
} Phoenix Mills Limited

~9 MILLION
SQ. FT.
DLF
~5.6 MILLION SQ. FT.
K. Raheja Corp.
~2.2 MILLION
SQ. FT.
24
RETAIL SECTO R
LACK OF QUALITY SUPPLY TO REMAIN A

CONCERN; REDEVELOPMENT AND RE-
TENANTING ON THE RISE
MAJOR TRENDS TO LOOK OUT FOR IN 2019
Figure 3-3: Share of online retail sales in India Figure 3-4: Online retail sales in India (USD million)
6.0% 60,000
5.0% 50,000
4.0% 40,000
USD million
%
3.0% 30,000
2.0% 20,000
1.0% 10,000
0.0% 0
2014 2015 2016* 2017* 2018* 2019* 2016 2017 2018* 2019* 2020* 2021* 2022*
Note: * Indicates estimate; select items only
Source: Statista
5Statista
25
RETAIL SECTO R
TECH TO BECOME A GAME CHANGER FOR

RETAIL
Table 3-3: Expected sectoral growth drivers in 2019
Value & Mid- Entertainment (FEC and Hypermarkets and

City Food and Beverage Luxury Retail
Range Fashion Multiplex) Departmental Stores
NCR
Mumbai
Pune
Chennai
Hyderabad
Bangalore
Kolkata
26
RETAIL SECTO R
WHAT TO EXPECT
IN 2019?
Diversification in demand to continue, with
expansion by various domestic and
international brands across categories.
Change in FDI norms for e-commerce may

affect online sales and investments in the
segment in the short-term.
Despite uncertainty across the e-commerce

segment, omnichannel retailing is grow and
evolve.
Developers and retailers likely to use tech for

studying consumer patterns and enhance
customer experience.
Supply addition expected to improve with

nearly 10-12 million sq. ft. of development
completions in 2019; investment activity likely
to pick up if quality assets become available.
Experiential retail and placemaking will be the

key.
Figure 3-5: Online retail penetration has risen
Source: Euromonitor
6India
Brand Equity Foundation (IBEF)
27
LOGISTICS SECTOR
ON THE PATH TO TRANSFORMATION
L O GISTICS SECTOR
SUPPLY – DEMAND DYNAMICS, RENTAL

MOVEMENT, DEMAND DRIVERS
29
L O GISTICS SECTOR
Figure 4-1: How cities and sectors have performed: 2018 vs 2017
2017 2018
4% 2% 3% 1%
7% 9%
23%
31%
8%
12%
10%
14%
19%
16%
22%
19%
Bangalore NCR Chennai Mumbai Mumbai NCR Bangalore
Chennai Hyderabad Kolkata
Kolkata Hyderabad Ahmedabad Pune Pune Ahmedabad
4%
2% 2% 1% 6%
5%
4%
6% 32%
5%
35%
9%
11%
15%
22%
18% 23%
3PL FMCG 3PL E-Commerce

Engineering & Manufacturing E-Commerce Engineering & Manufacturing Retail
Retail Automobile Electronics FMCG
Telecommunication Automobile
Paint & Chemicals Others
Others
Note: Others Include – Pharmaceutical, Electronics, Telecom, F&B

30
L O GISTICS SECTOR
POLICY HAZARD MAY IMPACT E-COMMERCE

ACTIVITY; NEVERTHELESS, THE SECTOR IS
EXPECTED TO PERFORM IN THE LONG RUN
Table 4-1: Policies – the government’s push for sectoral growth
Initiatives Objectives Impact on Industrial & Logistics sector
Infrastructure Status Granted in the 2018 Union Budget, the move has Besides 100% FDI in the storage and
enabled the logistics sector to access infrastructure logistics sector which is instrumental in
lending at easier terms with enhanced limits. attracting foreign funds, the infrastructure
status is envisaged to spur activity from
leading developers and bring in domestic
investments into the sector.
Revising load capacity The load capacity of heavy vehicles was increased by 20- This revision by the transport ministry is
of heavy vehicles 25%, which is now at par with global standards. likely to reduce logistics costs by 2%.
Integrated Industrial Maharashtra has taken some concrete steps to stimulate Both these initiatives are aimed at
Area (IIA) & Logistics private partnerships for industrial developments. These improving infrastructure, regularise
Park Policy, 2018 - include increasing the FSI from 1 to 2, incentivizing stamp unauthorised developments in industrial
Maharashtra duty, reducing minimum land requirement from 40 areas and tap into unutilised land parcels.
hectares to 20 hectares and revising the land use ratio
(industrial: others) from 60:40 to 80:20. The state has
also introduced an integrated logistics policy, which
revolves around setting up about 120 logistics parks
across the state under the supervision of the Maharashtra
Industrial Development Corporation (MIDC).
National Logistics The policy is being prepared by the logistics division The policy aims to provide an impetus to
Policy (2019) within the commerce ministry. The Ministry of Commerce trade, enhance export competitiveness,
had published the draft policy In February 2019 and improve India’s ranking in the Logistics
opened the document for public discussions till March Performance Index to between 25 and 30,
2019. among other initiatives.
31
L O GISTICS SECTOR
DEMAND TO REMAIN UPBEAT IN 2019
Table 4-2: Expected sectoral growth drivers in 2019

Engineering and
Cities\Segments 3PL e-Commerce FMCG Retail
Manufacturing
NCR
Mumbai
Pune
Chennai
Hyderabad
Bangalore
Kolkata
Figure 4-2: Pre-GST and Post-GST demand
8.0
Pre - GST Post - GST
6.0
In Million sq. ft.
4.0
2.0
0.0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2017 2018
32
L O GISTICS SECTOR
SUPPLY FOLLOWING DEMAND
Figure 4-3: Future pipeline across major cities
16
Supply 2019E
14
Supply 2020E
12
In million. sq. ft.
10
8
6
4
2
0
NCR Bangalore Mumbai Chennai Hyderabad Pune Kolkata
33
L O GISTICS SECTOR
CONTINUED IMPETUS ON MANUFACTURING

SECTOR TO DRIVE DEMAND
RENTAL APPRECIATION ANTICIPATED

ACROSS CITIES
WHAT TO EXPECT ADOPTION OF NEW TECHNOLOGIES TO
IN 2019?
IMPROVE EFFICIENCY AND FLEXIBILITY
Significant supply addition expected; share of

Grade A supply in overall supply expected to
increase.
Demand from e-commerce players may slow

down in the short term due to policy disruptions;
in the long run, BTS properties to become more
commonplace for such players.
Favourable policy framework and government

focus on infrastructure initiatives is likely to spur
growth in the sector; greater use of technology
expected in the sector.
Focus on building in-city logistics, grocery

deliveries and cold chain facilities to see
greater activity.
34
CAPITAL MARKETS
STABILITY TO ENSUE
CAPITAL M ARKETS
STABILITY TO ENSUE
36
CAPITAL M ARKETS
STABILITY TO ENSUE
TRENDS EXPECTED IN 2019
Figure 5-1: Investment share across major cities

2017 7% 2018
19% 2%
6%
30%
2% 9%
41%
2%
4%
12%
13%
16%
14% 23%
Delhi NCR Mumbai Chennai Hyderabad Mumbai Chennai Bangalore Delhi NCR
Bangalore Pune Kolkata Others Hyderabad Pune Others
Figure 5-2: Investment share across major sectors

1% 1%
4% 2% 3% 3%
5% 5%
13%
48%
53%
34%
28%
Office Site Retail
Hotel Residential Warehouse Office Site Retail
Mixed Residential Industrial Hotel
Warehouse
37
CAPITAL M ARKETS
STABILITY TO ENSUE
Figure 5-3: Real estate exposure to total assets (NBFC) in India
2015-16 2016-17 2017-18
4.8%* 6.3%* 7.5%*

*Percentage of Total assets
Source: Reserve Bank of India (RBI)
38
CAPITAL M ARKETS
STABILITY TO ENSUE
Table 5-1: How will 2019 be different from 2018?
Trends forecasted for 2018 Will it hold true for 2019?

Core to remain focus: • With limitation of investable assets in core locations, investors
• With the availability of well leased assets across core locations, are expected to also look for well leased assets in peripheral
PE investments in core assets are likely to continue. locations.
• Yields are expected to remain stable. • Yields witnessed a slight compression in 2018. During 2019,
• Commercial assets to be preferred. yields are expected to remain stable.
• Commercial assets to remain in focus, however, investors are
expected to look for alternate assets such as retail, warehouse,
co-working and data centers.
Consolidation among developers as well as large land owners with • This trend is expected to continue in 2019 as well with
smaller players expected to look for avenues of funding or resort to consolidation amongst land owners and NBFC players as well.
asset monetisation.
Incremental interest for equity: • Equity funding is expected to continue with restriction to asset
• Compared with the past couple of years where debt remained types such as commercial and retail.
the dominant flavour, there has been a selective but • It is expected that the residential sector will still be driven by
incremental appetite for equity as a source of funding. debt. Equity will be the preferred funding mechanism in
commercial and industrial assets.
Table 5-2: 2019 Investment strategies
Tier I - Look for opportunities within sectors
Core assets will remain the focus, investors should also look for upcoming peripheral
Office
and suburban locations where rents are catching up with core locations.
As quality retail space is significantly under-supplied, investments in under-

Retail
construction / new development and even redevelopment should be considered.
Investors should look for prime properties in tier I cities with good infrastructure;
Logistics
greenfield opportunities should be at the forefront.
Investors could also look at alternate sectors such as data centers, co-living, student
Other sectors
and senior housing, etc.
Tier II – Look for opportunities in cities with good fundamentals
Investors should focus on quality assets in core locations in cities such as Kochi,
Office Trivandrum, Mysore, Ahmedabad, etc.
Investors should concentrate on quality assets with rising footfalls in core and non-
Retail core locations.
Investors should look at warehouses located along the upcoming industrial corridors
such as DMIC (Delhi-Mumbai Industrial Corridor), CBIC (Chennai-Bangalore Industrial
Logistics Corridor), ADKIC (Amritsar-Delhi-Kolkata Industrial Corridor), MBIC (Mumbai-
Bangalore Industrial Corridor).
39
CAPITAL M ARKETS
STABILITY TO ENSUE
INCOPORATING TECH INTO FINANCIAL
WHAT TO EXPECT DECISION MAKING
IN 2019?
As the number of NBFCs have increased in
recent years, the current scenario and
government policies will lead to consolidation
of NBFCs.
PE investments are likely to focus on completed

and under-construction quality assets in office
and retail segments; residential sector will
continue to be dominated by debt funding.
As the due diligence process tightens, the

quality of loans is also anticipated to improve,
however, as a result funding costs may rise.
40
RESIDENTIAL
PATH TO RECOVERY CONTINUES
RESIDENTIAL SECTOR
42
RESIDENTIAL SECTOR
INCREASING HOUSEHOLD DISPOSABLE

INCOME AND CONTAINED INFLATION TO
SOW THE SEEDS FOR REVIVAL
Table 6-1: Policy measures and its impact on residential sector in 2018
Policy Key Highlights Current status
Real Estate Regulatory RERA was aimed at ensuring accountability • More than 26 states and UTs have notified rules
Act (RERA) and infusing transparency and uniformity in under the RERA and more than 20 states have
practices prevalent in the real estate sector. their websites operational under the provisions of
RERA.
• As on December 2018, more than 34,000 RE

projects have been registered under the RERA.
Affordable Housing The government relaxed carpet area norms • Revisions in GST rate were undertaken in Feb
multiple times for affordable housing 2019. The GST rate is down from 8% to 1% on
incentives. GST relaxations were also made. under-construction properties (subject to no ITC).
Also, as previously, there is no GST on completed
projects.
• Area relaxations for affordable housing were also

undertaken in Feb 2019. Affordable housing now
includes units upto 60 sq. m. in metropolitan cities
(NCR including Delhi, Noida, Greater Noida,
Ghaziabad, Gurgaon and Faridabad), Bangalore,
Mumbai – MMR region, Chennai, Hyderabad and
Kolkata) having value up to INR 4.5 million. This
is up from the previous area definition of 30 sq.
m.
• For non-metropolitan cities / towns, units upto 90

sq. m with value up to INR 4.5 million have been
included in the affordable housing category. This
is up from the previous area definition of 60 sq.
m.
Insolvency and The inadequacy of RERA to address the • Home buyers have been recognized as financial
Bankruptcy Code concerns of home buyers in case of creditors which treats them at par with the
Amendment (IBC), corporate insolvency has led the central financial institutions to receive their share in case
2018 government to amend the law. of insolvency proceedings.
• The amendment is also is in sync with RERA, in

case of any delay from the developer, allottee has
the right to demand for refund of the entire
amount with interest.
43
RESIDENTIAL SECTOR
THE SUPPLY-DEMAND CONUNDRUM: WHAT

TO EXPECT IN 2019 – SUPPLY TO IMPROVE
Figure 6-1: Supply demand dynamics
2,50,000 Period of decline owing to Inflection Point Recovery

policy disruptions and - developers owing to
supply demand mismatch realigning their right supply
2,00,000
business to meet the
models to cater demand
1,50,000
new demand
No of units
1,00,000
50,000
0
Supply Demand Supply Demand Supply Demand Supply Demand Supply Demand
2014 2015 2016 2017 2018
Figure 6-2: Household disposable income vs CPI inflation

1,20,000 12.0%
1,00,000 10.0%
80,000 8.0%
INR Billion
60,000 6.0%
%
40,000 4.0%
20,000 2.0%
0 0.0%
2012 2013 2014 2015 2016 2017 2018
Household Disposable Income CPI inflation rate (%)

44
RESIDENTIAL SECTOR
DEMAND TO BE STRONGER IN 2019, MID /

AFFORDABLE HOUSING TO LEAD ASSET PRICING: TO BE LARGELY STABLE
MAJOR TRENDS TO LOOK OUT FOR IN

2019: APPROPRIATE LOCATION, RIGHT
SIZING & PRICING TO DRIVE THE SECTOR
Table 6-2: Supply forecast for 2019

Overall
Time Period NCR Mumbai Bangalore Chennai Hyderabad Pune Kolkata
India
H1 2019
H2 2019
Table 6-3: Demand forecast for 2019

Overall
Time Period NCR Mumbai Bangalore Chennai Hyderabad Pune Kolkata
India
H1 2019
H2 2019
45
RESIDENTIAL SECTOR
TECH TO AID SALES AND REVOLUTIONALISE

THE CONSTRUCTION INDUSTRY
46
RESIDENTIAL SECTOR
WHAT TO EXPECT
IN 2019?
Supply- demand scenario is expected to
improve, unsold inventory levels to further
decline.
Consolidation among developers to continue

in 2019, delivery capabilities and balance
sheet strength to come in sharper focus.
Affordable housing will drive supply and

demand, to be backed by several government
reforms.
Alternate assets such as co-living, student and

senior housing will continue to garner greater
interest from end-users and developers.
8IMRB International
47
RESEARCH
CBRE RESEARCH
This report was prepared by the CBRE India Research Team, which forms part of CBRE Research – a network of preeminent researchers who collaborate to provide real
estate market research and econometric forecasting to real estate investors and occupiers around the globe.
All materials presented in this report, unless specifically indicated otherwise, is under copyright and proprietary to CBRE. Information contained herein, including
projections, has been obtained from materials and sources believed to be reliable at the date of publication. While we do not doubt its accuracy, we have not verified it
and make no guarantee, warranty or representation about it. Readers are responsible for independently assessing the relevance, accuracy, completeness and currency
of the information of this publication. This report is presented for information purposes only exclusively for CBRE clients and professionals, and is not to be used or
considered as an offer or the solicitation of an offer to sell or buy or subscribe for securities or other financial instruments. All rights to the material are reserved and
none of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party without prior express written
permission of CBRE. Any unauthorized publication or redistribution of CBRE research reports is prohibited. CBRE will not be liable for any loss, damage, cost or expense
incurred or arising by reason of any person using or relying on information in this publication.
To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at www.cbre.com/research-and-reports
© 2019 CBRE, Inc.

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C B R E R E S E A R C H | I N D I A

2019: CHANGE TO BECOME A NEW NORM

1International Monetary Fund (IMF)

GDP GROWTH TO CONTINUE

FACTORS THAT WILL SHAPE THE INDIAN

GDP GROWTH TO CONTINUE

Figure 1-1: GDP growth rate

Figure 1-2: Key interest rates

GDP GROWTH TO CONTINUE

Source: Oxford Economics, CBRE Research, Q4 2018

3.0% 3.7% 3.7% 2.8%

CPI Headline(%y-o-y, Base: 2011-12) WPI (% y-o-y, Base:2011-12)

GDP GROWTH TO CONTINUE

Figure 1-5: INR versus USD – exchange rate movement

GDP GROWTH TO CONTINUE

Table 1-1: Policy Initiatives

• 1% on under-construction property with no

GDP GROWTH TO CONTINUE

Table 1-1: Policy Initiatives (Continued)

GDP GROWTH TO CONTINUE

HOW IS 2019 EXPECTED TO UNFOLD?

Figure 1-6: Consumption growth 2018 to 2019

Source: Oxford Economics, CBRE Research, Q4 2018

2Boston Consultancy Group, Feb 2019

DISRUPTING THE DISRUPTIONS

CBRE Research , Q1 2019

DISRUPTING THE DISRUPTIONS

OFFICE DEMAND 2019: NEW SOURCES OF

Table 2-1: Themes continuing from 2018

Table 2-2: Themes expected in 2019

Source: CBRE Research, Q1 2019

DISRUPTING THE DISRUPTIONS

Estimated SEZ stock of 2019 Expected vacancy in 2019

DISRUPTING THE DISRUPTIONS

SUPPLY TRENDS 2019: TECH-TAILORED

Figure 2-4: Office portfolio growth intentions: APAC vs India

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

Increase by more than 10%

Reduce by more than 10%

Remain the same

Not yet decided

DISRUPTING THE DISRUPTIONS

Figure 2-5: Growth of the flexible space segment in India

Figure 2-6: Anticipated rising share of net absorption in India

DISRUPTING THE DISRUPTIONS

RENTAL TRENDS 2019: TAPERED GROWTH

HOW TECH WILL IMPACT THE SECTOR

DISRUPTING THE DISRUPTIONS

Rise in evolved sources of demand and strong

Lack of readily available supply is likely to result

Rental growth is likely to occur in a few, select

Occupiers are anticipated to reinvent

Tech enablers such as employee mobility and

Occupiers are expected to increasingly tilt

Figure 3-1: Pipeline set to improve across major cities

Source: CBRE Research, Q1 2019

“CHERISH” RETAIL TO EMERGE STRONGER

RETAIL CONSUMPTION EXPECTED TO RISE:

“CHERISH” RETAIL TO EMERGE STRONGER

NOT ONLY BROWNFIELD: INCREASING

CHANGING THE RULES: AMENDMENTS IN

Table 3-1: Key investors and their portfolios in India

Table 3-2: Key Players and their Portfolios in India