MUMBAI: The housing market is poised to regain momentum in the year 2014 and the turnaround of its fortune, is expected to coincide with the upcoming union budget. Analysts believe that if the residential market has remained stable during the year 2013, despite poor macroeconomic sentiments, it shows there is enough appetite for housing and projects, at the right price point, which are continuing to sell across the country. Moreover, with the reported inventory and expected supply coming in during the year, the much sought after ready-to-move apartments would be a reality in most of the major real estate markets, across the country.
In the residential real estate sector, select locations may witness healthy activity and garner good response from developers, investors and end-users alike, due to ongoing infrastructure developments such as the metro rail and mono rail connectivity, construction of flyovers, inner and outer ring roads, which are at various phases of construction in Bengaluru, Chennai, Mumbai and Delhi-NCR.
A KPMG study finds that in the last one year, in comparison to other big ticket purchases such as automobiles, foreign travel and tour, etc., which are witnessing a degrowth, residential real estate has performed well, despite adverse macro conditions. The residential property sector is witnessing a quarterly run-rate of about 50,000 units (data of top eight cities) on an average since 2010, owing to emerging and end-user driven markets such as Bengaluru, Kolkata and Greater Mumbai. Major markets such as Delhi-NCR and Mumbai, are observing slightly negative or stable growth. This trend is despite an average property price rise of 50 per cent, across India, over the last four years and a ban on 80:20 schemes for property purchases by the Reserve Bank of India (RBI).
“There has been a lag in accommodating the new supply in the market, which inflated the inventory of unsold property to a record high of 4 lakh units. At the current rate of 50,000 units per quarter, it would take about 24 months to clear the existing inventory, which is significantly high above the comfortable level of 14-15 months. The property market of Bengaluru appears to be the most attractive in current conditions, as it is witnessing strong growth and with high inventory (it would take about two years for the inventory to clear) and thus, an investor could secure a deal at an attractive price. Chennai, Pune and Kolkata, appear to be other attractive markets where quarterly volumes are holding out well. Investors may be able to secure a favourable deal in Chennai due to high inventory. However, in Pune and Kolkata, they may have to bargain hard as inventory levels are low,” points out Neeraj Bansal, partner, Real Estate & Construction, KPMG.
A Cushman & Wakefield report also states that overall, residential markets are expected to witness stable capital values, except for those developments that are over leveraged and are not able to attract sales. Such developments and locations are expected to see some correction downwards.
These are especially expected in locations/developments in Mumbai and NCR, where margins of corrections are higher. Southern cities will see stable rentals with a downward bias in oversupplied and peripheral markets. Some developers may continue to struggle with liquidity issues and be forced to offer some discounts and/or freebies to boost sales.
Sunil Mantri, president, NAREDCO, says in many ways, calendar year 2013 has marked a period of transition for the real estate sector, taking it to a higher level on various fronts. To begin with, the Indian economy on the whole, has witnessed a rather bleak growth during the year 2013. The Indian rupee hit a historic low against the US dollar, which escalated the costs and reduced property transactions. Inflation reigned at rather high levels and benchmark interest rates were repeatedly raised by the RBI in order to keep inflation in check.
“The residential segment sales have already started picking up and with a stable government expected in coming times, the market sentiments will improve further and boost sales. The residential segment would remain a focus area for investors and buyers alike, especially those properties which are mid-sized and priced reasonably and offer the advantage of location and good infrastructure. However, marquee projects in prime locations, from well-performing brands, will continue to witness transactions which had been the case in 2013,” says Mantri.
Throughout 2013, property prices in most key property markets, remained stable, exhibiting a rise of 10 to less than 10 per cent and some even saw a minor drop in some markets. The second half of 2014 is likely to witness a gradual revival in absorption whereby, the residential real estate capital values will increase in a subdued range of 10-12 per cent, year-on-year, pan-India, for the whole year. With scarce availability of land in the urban areas, the existing dilapidated structures standing on these land plots, since ages and the implications of the Land Acquisition Bill 2013, will make land purchasing costlier and redevelopment will emerge as another growth driver in 2014.
Hiral Sheth, spokesperson of Mumbaibased Sheth Creators, agrees that the residential market in 2014, will see a positive shift and will bring in consistency to the residential property market. The buyers who have been fence-sitters for a long time, will look forward to investment in property. Although, high-end housing will be preferred for investment amongst HNIs and NRIs, the demand will also be towards the mid-segment as the most preferred category.
“While investing in a residential project, the end-user will give utmost significance to location and this will be the top-most purchase consideration for a home buyer in 2014. This will be an important shift in the behaviour of the homebuyer in the forthcoming year. Other factors that will influence purchase decisions are connectivity of the location, followed by the price factor. Social infrastructure around the project will play an important role and will definitely influence the mind set of investors. Proximity of the property to hospitals, schools and offices, will be a driving force towards investment. In 2014, residential projects with an economical budget and superior location and connectivity, will win the race,” says Sheth.
Rahul Gaur, CMD of Brys Group, shares how the year 2013 has taught everyone to be realistic, whether it is the developer, investor or the end-user. According to him, the speculators and investors who have been the primary buyers for projects since a long time will make way for end-users this year. Homebuyers would want to buy property to meet the growing family requirements and for long-term investment. At a broader level, the industry may experience a positive shift from the earlier year and it will bring in the much required stability and growth in the property market. “Right projects in the right locations at the right price point, did well even in 2013. The dynamics of the residential market are different from commercial spaces and since the housing market has realised the side-effects of artificial appreciation, we have just entered a matured phase where most of the transactions will be by the endusers. Of course, market sentiments do play a big role but this year, first the union budget and then the general elections, will change the overall sentiments,” says Gaur.
Gaurav Gupta, general secretary, MD, SG Estates, says in 2013, the Indian economy also witnessed poor macro-economics, along with slow income growth, a depreciating rupee, sky-rocketing inflation and high borrowing rates, combined to make consumers wary of spending. Despite this, real estate prices continued to exhibit an upward movement, even as the weakening rupee steadily eroded the purchasing power. “In 2014, every developer and buyer is hopeful for a better economy. In northern India, we expect more affordable housing projects to be launched in 2014. The new affordable housing policy, on the lines of the one for Haryana and Rajasthan, is also expected for UP, which will help in the development of EWS/LIG houses where the maximum demand exists,” says Gupta.
It is said that the real estate sector, in general and the housing market, in particular, is by and large sentiment driven. The sentiments are largely positive as 2014 dawns with the expectations of a revival and the initial indications, are leading the housing market in the right directio