1. Real estate sector to see pick up in sales in 2016

Real estate sector to see pick up in sales in 2016

Realty experts believe that the year 2016 will begin on a positive note for the sector and may witness a pick up in sales with an improvement in the number of unsold inventories.

By: | Updated: December 23, 2015 1:18 PM
real estate in 2016

Realty experts believe that the year 2016 will begin on a positive note for the sector and may witness a pick up in sales with an improvement in the number of unsold inventories.(Photo: Reuters)

In the year 2015, Indian real estate sector witnessd regulatory changes that included relaxing of foreign direct investment laws and the Union Cabinet approving the much awaited Real Estate Bill. There are mixed reactions from realty experts on the regulatory changes for the real estate sector, but broadly everyone sees it as a positive move for the sluggish real estate sector.

Experts also believe that the rate cut of 50 basis points by the RBI in its September monetary policy review and the seventh pay Commission released by the government panel will boost the real estate sector in terms of increased demand and supply.

According to a Financial Express newspaper report published on Dec 13th this year, investments into the real estate sector in 2015, at close to $8 billion or Rs 53,000 crore, are poised for a seven-year high even when the sector is not in a good shape. The BSE Real Estate index plunged 16 per cent on a year-to-date basis till December 18.

Cushman and Wakefield estimates around $2.8 billion or Rs 18,700 crore had been invested by private equity players in the real estate market till end September. Add to that an estimated $4.5 billion, or Rs 30,500 crore, of NCDs — till November 2015 — and the tally is already up by 74% over last year’s Rs 17,600 crore.

Realty experts believe that the year 2016 will begin on a positive note for the sector and may witness a pick up in sales with an improvement in the number of unsold inventories.

Anuj Puri, chairman and country head, JLL India said, “The past two years reveal that the market has been adjusting to new trends in terms of aligning supply with relevant demand. Developers are paying more attention to the requirements of buyers and have started supplying a higher proportion of mid-segment apartments that are priced in the range of Rs 75 lakhs to around a crore, particularly in tier-I cities.”

He further adds that although sales have been low throughout the past 4-5 quarters on account of low sentiment, there is of late a steep rise in inquiries. That may be attributed to factors such as stagnant growth in prices, lower ticket size of apartments (also resulting from smaller unit sizes), consistent fall in interest rates through 2015 – and, more broadly, an overall improvement in macroeconomic factors. Given these factors at play, 2016 could witness a more balanced demand-supply equation that should bring down unsold inventories across major cities to a more sustainable level. Price growth could remain subdued, although I anticipate a pick-up in sales.

CommonFloor, co-founder and head of CommonFloor Groups, Vikas Malpani sees the real estate bill approval as a positive for the sector, which along with other trends could shape the real estate sector in 2016.

High demand for ready-to-move in projects and increased focus on project completion will set the contours for the realty sector outlook in 2016. Prospective home buyers, who wish to buy a house for self-use will look at property that is ready for possession within one year.

Echoing similar thoughts as JLL’s Puri’s on unsold inventories, Malpani said, “Number of new launches have declined across cities, as per our research. On the positive side, this trend highlights the fact that developers are focusing more on completing their existing projects and clearing their unsold inventory.”

Giving a thumps up to the Real Estate Regulatory Bill, Malpani feels the trend to clear unsold inventory will most likely continue in the coming year as well. This is because whenever any new bill or law comes into play, developers tend to adopt a wait and watch approach. Therefore, completion of existing projects is expected to be the prime focus of developers for some more time.

JLL’s Puri lists Noida & Greater Noida – National Capital Region (NCR), Thane – Mumbai Metropolitan Region ( MMR), Navi Mumbai – Mumbai Metropolitan Region ( MMR), Whitefield – Bangalore, Viman Nagar and Nagar Road – Pune and Kochi as the places that could be good realty bets in the year 2016.

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  1. A
    Feb 29, 2016 at 7:02 am
    This is a great news for the aam janta like us who invested their extra hard earned money with the hope of earning greater returns. With the planned real estate bill, the environment seems to be getting even safer now. I make an investment last year in Chennai with radiance realty. Hoping to see an appreciation in near future. Fingers crossed!
    1. M
      Jan 22, 2016 at 12:03 pm
      rubbish, the prices are going to crash as much as 50%. There will be mive price corrections. In 2014 we would have seen a crash as banks stopped lending. It was the stupid private equity players who bailed out the builders. Now things are different even they would think twice before lending their hand. Yes buyers will see god days ahead. properties in Mumbai will become affordable
      1. Ratika Shetty
        Jan 6, 2016 at 11:48 am
        It is certainly reuring to hear about the positive forecasts for the real estate market in the year 2016. Since I am personally thinking of purchasing real estate next year, this article was certainly helpful. This article does a good job of backing their argument with sound evidence. The article talks about NCR being a good realty bet in the year 2016 and I agree with that essment. With big realty companies like Mahindra coming up with spanking new projects like Aura and Luminare in the region, is already starting to draw attraction as one of India’s hottest upcoming projects.
        1. V
          Apr 9, 2016 at 10:25 am
          ries will keep falling. india is failing in business. IT sector does not have anything big to offer. be careful in your investments. apartments prices will not go high. in india everything is hype and dramatic.
          1. S
            Dec 22, 2015 at 12:15 pm
            Looks like JLL's Puri has no ets in Hyderabad lol
            1. A
              Dec 23, 2015 at 8:31 am
              dream on... every year the same story is said.... metro cities need correction to bring flats in affordable range
              1. India Real
                Dec 21, 2015 at 11:02 am
                Good to hear that the new year will bring positive news for the Indian Real estate Sector.
                1. R
                  Dec 27, 2015 at 11:09 am
                  In my opinion the real estate prices are going to crash by 40%-60% in near future. I have the following reasons in support of my argument. 1- The builders are paying a huge inventory holding cost and can not hold for ever. 2- The builders have taken huge loan from International agencies in USD. with the rupee falling against USD, the conversion rate will in the range of INR 69-71 against 1 USD by the end of December. The interest payment and the repayment of loan has hit the builders hard. 3- A lot of Indians have bought property hoping they will get a good return and stuck as they could not exit. These people have low holding capacity and cannot pay EMI for long. They will be the first bent down. 4- the property prices will fall 20-25% in 2016 and further fall of 20-25% in 2017. There will not scope of investment in real estate up to 2022 as the prices will remain under pressure. 5- Builders have two options slash the price and get rid of 17 lakh unsold units or perish.
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