With
half the year or two quarters over, it is the right time to analyse the real
estate markets growth and future trends, for the balance of the year as well as
coming years. Real estate growth in India still remains a mixed bag. One thing
which has happened with the slow-down in the last few years is that the methods
of analysis have changed, the markets have become more granular and delinked.
This implies that what may be applicable for Mumbai, may not work out for
Bangalore or any other city for that matter and similarly what may work for
residential markets may not work for the commercial sector. The diversification
implies that the method of analysis for the real estate sector also need to
change and need to account for more factors.
Today we simply can’t have generally analysed
reports based on tier I, II and tier III cities. As already brought out, what
may work for one tier I city may not be relevant for another. These generalised
analysis and reports have been one reason why the slow-down, its impact and
duration could not be predicted accurately in the past. Let’s look at how the India Real Estate websites market is going
to be impacted by the economic environmental changes taking place world over.
The Real Estate Market Indexes and its
myths
As
per the latest RBI Housing Price Index for ten cities the HPI eased to 5.2%
year on year in the first quarter of 2016, this includes residential and
commercial sectors; it is the worst performance of the sector in the past 2
years. The HPI was at 17.5% during the quarter of 2015, this seemingly gives a
very gloomy picture. However, we need to understand how this index is
calculated, the initiation of new projects and increase in inventory are the
key contributors towards the calculation of the HPI. As one is aware, that due
to surplus inventory, non-availability of funds and a cautious builder
approach, new launches have been limited to bare minimum in the past 2 years;
this is the main reason for the negative growth trend in HPI. Therefore, the HPI and similarly other
property indexes do not really project the actual market sentiment and should
be viewed like that. Based on the HPI the cities which have done well are
Chennai, Bangalore and Mumbai with index growing at 12.1%, 7.2% and 6.8%
respectively. NCR has shown the worst growth at 4.1%.
Effect of Brexit on the Indian Real
Estate Market
Brexit
has had a huge impact on the real estate sector in UK, within 2 weeks assets
worth more than 15 million pounds have been frozen, from a total allocation of
24.5 million pounds. All the major players including Henderson Global
Investors, Columbia Threadneedle, Canada Life, Aberdeen Fund Managers, Standard
Life Investments, Aviva Investors have contributed towards this freeze.
Analytic pundits would argue that this has no direct impact on the Indian real
estate market, which is true. However, many of the overseas investors for
Indian real estate website & market would be affected by this, which would
indirectly impact the inflow of FDI in the real
estate in india, as market confidence is a major factor for driving
investments.
Is the real Estate slow-down in India
over?
Every
investor big or small has this doubt or question in mind while carrying out any
investment today. The market confidence has been so low that even the ‘prediction
pundits’ are exercising caution and the wait and watch game is being played by
all the affected parties. A general assessment of the current situation and
looking into the future one is forced to conclude that the worst might be over.
The basic facts are – the Indian economy
is on a recovery path with a predicted growth rate of 7.5 to 8%; as far as real
estate market is concerned India has a huge end user market which is growing at
a steady rate; the urbanisation figures are estimated to grow adding 2 million
households every years, which directly effects the real estate sector;
government policies like ‘housing for all’, ‘black money bill’, ‘real estate
regulatory bill’, enhanced FDI limits for real estate, ironing out of the REITs
issues etc are all going to have a positive impact on the sector; the property in india has seen a correction of
5 to 20% from city to city in the last 8 quarters on the trot, the last quarter
i.e. Apr-Jun 2016 has generally seen a steady market across all cities and verticals.
These are all confidence and economic boosting measures which have a direct as
well as indirect impact on the real estate sector.
The Euro Cup Analogy
Probably
the Euro Cup is the right example of how the real estate market has performed
in the last couple of years; whether the exits of England, Spain, Italy in the
preliminary stages or Germany’s unexpected exit at the semi-final stage; Wales
unexpected performance; however, nobody had predicted a Portugal and France
final – similarly the unpredictability has added more zing, challenge and
excitement to visualise as to how the future prospects of real estate in India
would unfold. Any bets on who takes away
the trophy? May the Protégées defy the home turf advantage and prove their
critics wrong!
