DELHI: A slowing economic growth, coupled with high property prices and steep interest rates, resulted in weak demand for housing during the second half of 2013, according to CBRE’s bi-annual India Residential Market View report for H2 2013. High vacancy levels and rising construction costs led to a slowdown in construction activity, leading to a decline in new launches, and further delay in project completion timelines.
Liquidity issues and an increasing inventory caused developers to shift their focus from new launches to the completion of existing projects—although delays in project execution continued to remain an over-riding concern in most emerging housing markets. Real Estate Developers reduced prices across select projects and offered discounts or marketing promotions to attract buyers in micro-markets with high inventory levels.
While the premium housing segment saw a steady interest from high net worth individuals (HNIs) and non-resident Indians (NRIs), end-user demand in the high-end and mid-end segments remained low. The depreciating rupee, which tumbled to a series of record lows during 2013, resulted in an increase in NRI enquiries for property in India.
Commenting on the findings of the report, Anshuman Magazine, chairman and managing director of CBRE, South Asia Pvt. Ltd. said, “Home buyer sentiments remained cautious and subdued due to high price points, with preferences shifting to secondary and emerging micro-markets of leading cities. Housing demand in the high-end and mid-end, as well as in the luxury segment, is likely to remain sluggish across India’s leading cities during the first half of 2014, due to the subdued, pre-election macro-economic environment.”
The Delhi NCR witnessed capital appreciation across most micro-markets. Capital values in locations such as Sohna Road and MG Road in Gurgaon increased by 4–5 per cent owing to strong demand for high-end properties over the last review period. Mumbai’s housing market remained largely stable, with a slight appreciation in select premium micro-markets. The exception was Central Mumbai, where values declined by 4–5 per cent, owing to sluggish demand, in comparison to the first half of 2013. While prices appreciated in Bangalore’s Whitefield, the Outer Ring Road (ORR), Koramangala and Hebbal due to enhanced housing demand; a cautious home buyer sentiment continued to keep capital values stable in the luxury and high-end segments of Kolkata and Hyderabad.
The first half of 2014 is expected to continue witnessing sluggish housing demand across India’s leading cities. The passage of the Land Acquisition Act and the proposal for setting up the Real Estate Regulatory Authority (RERA) will hopefully help improve transparency, and the investment climate in India. The consideration of Real Estate Investment Trusts (REITs) by the Securities and Exchange Board of India (SEBI) is likely to further open up opportunities for small investors to diversify their real estate asset portfolio and inject funds into the Indian property market.
About CBRE Group
CBRE Group (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2013 revenue). The Company has approximately 44,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through approximately 350 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting.