Realty Looks Set For Better Tidings – The Indian Express – 27-Dec-2014
December 30, 2014 - Uncategorized
The year 2014 has been quite fruitful for the real estate sector in terms of business sentiment, although the real effect of many of the policies and amendments announced in 2014 will take effect only in 2015. Starting from Union Budget FY2014-15, where affordable housing was considered on par with infrastructure, to relaxation of rigidities in the Land Acquisition and Real Estate Regulatory Bill, the country’s new Prime Minister has been offering the real estate sector consistent doses of energy.
The winds of change are now blowing more perceptibly. Inflation, including the house price component, has now been reduced to the lowest level in recallable history. Property buyers are back in force in most cities as enquiries have rebounded, and developers are finally reading the writing on the wall more accurately and coming in with the kind of supply that is relevant to demand.
2015 will definitely be a good year for the real estate sector on two counts:
# The threat of inflation has completely submerged, and borrowing rates are sure to go down from the current levels. This will encourage potential buyers planning to avail of home loans to finally take the plunge. Also, with property prices staying stable and good deals being offered by developers in order to clear their inventory, fence-sitting buyers be further encouraged to press the ‘buy’ button.
# Economic activity is gradually picking up, and the Central Bank anticipates GDP growth to reach 6.5 per cent year-or-year in the next financial year (FY2015-16). Corporate India has already made it clear that there will be more hiring to help tackle rising business activity. Put together, this means a rise in jobs and incomes, which in turn is very favourable for both residential and commercial real estate.
Residential Real Estate
During 2014, new launches of residential units saw a consistent fall every quarter as a consequence of the subdued demand and high prices. While this was largely the case with high-end projects, the affordable housing segment definitely began to gain favour. This segment was firmly lodged under the priority schemes of the government and central bank, and buyers were seen finding comfort in investing in such projects given the smaller ticket sizes and improving connectivity in the suburbs of the major cities.
In the second half of 2014, many large developers who in the recent past concentrated on the mid-to-high segment due to better margins were seen eager to play the volume game and entering into affordable-segment projects in the deeper suburbs. This heartening trend began the ground work on bridging the wedge between demand and supply in our major metropolitan cities. Since developers are sitting on close to 30 months of unsold inventory in the mid-to-high-end segment, we also saw an increase in cash flows because of this new focus.
Completions, Net Absorption & Unsold Inventory – Residential
In 2015, developers will become more earnest about right-sizing and right-pricing their offerings. Smaller, yet better-designed and more efficient homes will define the residential real estate market in 2015, and selective corrections in somecontinued…