1. Residential real estate in for a rebound this year, 5 factors that may help

Residential real estate in for a rebound this year, 5 factors that may help

India's realty sector, especially residential sector, which has been witnessing slowdown since last couple of years is set to rebound from October onwards on overall economic scenario.

By: | Published: May 16, 2016 2:23 PM
Real estate - residential sector India’s realty sector, especially residential sector, which has been witnessing slowdown since last couple of years is set to rebound from October onwards on overall economic scenario. (Photo: Reuters)

India’s realty sector, especially residential sector, which has been witnessing slowdown since last couple of years is set to rebound from October onwards on overall economic scenario. The macroeconomic indicator and steps taken by the government to bring transparency in the real estate sector hint at reviving the sector in the long run.

“India’s residential property market has been going through turbulent times for past few years. However, things are looking up now with changes in the economy and various initiatives announced by the government,” Ashwinder Raj Singh, CEO – residential services, JLL India said.

High inventory levels, diminished demand and limited liquidity saw sales and prices plummet, impacting new launches. The real estate sector witnessed the worst phase in 2015-16.

According to a JLL report, as per statistics, new residential project launches reduced by 6 per cent in Jan-March 2016 period over Oct-Dec 2015. For FY 2015-16, the number of new launches stood at 1,81,294 units compared to 2,16,082 units in FY 2014-15, equalling a drop of 16 per cent.

Overall residential sales were down in the FY 2015-16 compared to FY 2014-15. As per recent data, 1,58,211 units were sold in FY 2015-16 vs 1,61,875 units sold in FY 2014-15, which is a drop of 2.2 per cent. However, a positive twist to this otherwise grim situation is the rise in sales in Q1CY2016. This quarter saw a sale of 42,521 units compared to 39,001 units sold in Q4CY2015 – an increase of 9 per cent.

Experts feel that Real Estate (Regulation & Development) Act implementation will give a push to ailing sector by restoring confidence among the end users in the sector through several initiatives. Among other provisions, the aggrieved party has a right to demand the amount paid with interest (at prescribed rates) in case of failure to give possession.

“The Real Estate Regulation and Development Act 2016 will encourage investments from foreign and domestic financial institutions and protecting the interest of the home buyers. Mandatory disclosure of projects, including details of the promoter, project, land status, clearances, approvals, etc. would increase the credibility of developers and would protect consumer rights as well, ” Shveta Jain, managing director, residential services, Cushman & Wakefield said.

JLL’s Ashwinder Raj Singh lists 5 points that suggest road ahead for the real estate sector:

-Trends are beginning to change based on expectations of a good monsoon, revival in the economy, reducing inflation and the fact that residential prices have bottomed out. Also, the improving regulatory environment in the real estate sector, coupled with progressive Government schemes like Smart Cities, AMRUT and ‘Housing for All by 2022’, are beginning to have a positive influence. Additionally factoring in banks’ passing on of interest rate cut benefits to the ultimate consumers, the residential sector is all set for rebooted growth.

-Where prices are concerned, there was stagnation or at best a modest rise by the end of FY2015-16. While Lucknow saw an increase of 16.1% in the prices in Q3FY2015, NCR saw a price correction of 5% during April-June, 2015. Going forward, prices are expected to rise modestly.

-The setting up of the Real Estate Regulatory Authority to ensure time-bound delivery of projects and more efficient and transparent dealings with developers point towards consumers gaining trust and coming back to investing in the market. A convincing start has been evidenced by the affordable housing segment, with this category witnessing increased traction on the peripheries of the major cities. Of the total sales, 60% of the properties were priced below Rs. 5000/sq ft in FY 2015-16.

-Global factors have an impact, but India’s currently low inflation rate coupled with low interest rates and a surging economy will doubtlessly induce faster grow in the residential real estate sector in the mid-to-long term.

-Various additional factors point towards a more positive sentiment, including the stimulus that the recent Union Budget provided to both the supply and demand sides, improved funding for the industry and the clearing of roadblocks on REITs. The most convincing signs of revival should be visible in the last quarter of 2016 or by the first quarter of 2017.

  1. K
    K keval
    Aug 2, 2016 at 1:34 am
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    1. S
      sudhanshu
      May 31, 2016 at 9:30 am
      This certainly looks like it will be a positive year for the real estate market in India. The various government decisions will also have a positive impact on the sector. The first quarter of 2016 has definitely been positive for real estate. Take a look at the OMR region of Chennai for example, it is expected to grow by 5% in the next three years. Not surprising to see exciting projects like Radiance Shine and PBEL City popping up in the region. Developers are certainly indicating that a rebound is imminent as well. Definitely exciting times ahead if you have interests vested in the real estate market!
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