In Times Of Uncertainty, Credibility Matters – The Indian Express – 13-Dec-2014
December 23, 2014 - Uncategorized
We are currently witnessing a market scenario wherein inflation and interest rates will taper down even as the GDP growth rate picks up, and selective asset classes are becoming highly attractive for investment. International market dynamics suggests that gold and crude oil will continue to weaken, and commodities as an overall asset class will continue to display weakness because of easing inflation.
Market pundits have already started to forecast 2015 as the best year in the current decade when it comes to real estate absorption. If we apply the thumb rule of every 100 square feet of absorbed commercial space yielding one new job to the net absorption of 40 million square feet of commercial space in 2015, it emerges that the coming year will see the generation of around 4,00,000 new jobs.
Considering this spurt in job creation in conjunction with the government’s ‘homes for everyone’ focus, absorption of residential units will improve dramatically in the coming months. The cities with maximum job creation — Bangalore, Gurgaon, Pune, Chennai and Hyderabad — will continue to dominate in terms of residential demand.
In this upbeat scenario, most investors will hasten to determine the most promising pocket within these cities. While it is true that location is a key consideration for successful residential property investment, it is only part of the story. Given that the highest ROI (return on investment) is typically gained from early investment in under-construction projects, an equally important variable is the reliability of involved developers.
Indian consumers are quite sophisticated when it comes to evaluating the brand value of most products they intend to buy. Despite the faith that leading brands inspire, consumers in the market for new mobile phones or cars will verify multiple details in terms of features, durability and service. Thanks to the Internet, the days of struggle for pertinent information are finally over. An online search for details on any product will generally yield a generous amount of data on which to base eventual purchase decisions. However, we do not see consumers engaging in this depth of research when it comes to real estate. This is a major concern, considering that real estate as a sector cannot boast of any real self-governance and does not yet have a regulatory body to govern transactions. Nevertheless, while investing in a real estate project, the developer’s credibility is a very important concern.
Hype Or Real Opportunity?
In India, few other sectors see the kind of exuberant advertising and hard promotion that real estate does. Buyers are constantly falling prey to misleading promotions and schemes that are actually attractive only on paper. In fact, many developers in India have limited or continued…