Published on: Jan 13, 2016 @ 11:08
It seems that the Indian real estate market is fairly well-positioned for the year 2016. The last year has seen a lot of positive developments and that the industry has high hopes from the year 2016. With the changes at the policy level, things are turning positive and it is expected that the Year 2016 will mark a new beginning for the real estate industry.
Experts of the industry are hopeful that the positive mood in the market will continue as sales are slowly picking up in a few cities, including Pune, Hyderabad, Mumbai and Bengaluru. Realty experts believe that the year 2016 may witness a pick up in sales.
Major policies
The government undertook some key policies initiatives to propel the growth and bring a positive sentiment in the real estate sector. In the year 2015, Indian real estate sector witnessed some regulatory measures that included relaxing of Foreign Direct Investment ( FDI) norms and allowing a 100 per cent FDI in real estate, the Union Cabinet approving the much awaited Real Estate (Regulation and Development) Bill and the RBI lowering its interest rates.
In order to encourage FDI in real estate, the government has relaxed norms. This could trigger a new wave of FDI investments into the sector in the near future. The government’s removal of earlier conditions on investment norms and minimum area under the foreign direct investment policy would boost investment in the housing sector.
A much-delayed Real Estate Bill approved by the Union Cabinet last year is expected to bring transparency, accountability, efficiency and much required confidence of consumer and financial institutions in the sector. The Indian Parliament is likely to pass the bill soon. More transparency in real estate will help in attracting foreign investments into the sector.
Besides, 2016 may witness the process of implementation of various mega missions of the government such as Housing for All by 2022, Smart Cities Mission, Atal Mission for Rejuvenation and Urban Transformation (AMRUT), Goods and Services Tax (GST) Bill, Real Estate Investment Trusts (REITs), etc. that are likely to give an impetus to the real estate sector. Once these projects move from the proposal stages to reality, we will see a better and a more organized Indian Real estate sector.
Capital Markets
India’s economic revival has gained momentum. India was recently confirmed as the fastest-growing economy in 2015 and further growth is expected in 2016.
With regulatory changes and better execution capabilities, Indian realty is being preferred as an investment destination by global investors. The global community is closely tracking the real estate sector in India and its positive performance would add to their confidence. Today, the world sees India as a land of opportunity for business and investment.
Prime Minister Narendra Modi’s foreign visits have strengthened India’s position globally as an investment destination and have helped India attract more FDI.
Investment scenario in real estate market in the year 2016 is likely to improve further. In fact, it may see the kind of investment activities that were seen in 2007 which saw investments of more than USD 8 billion into Indian real estate sector. The PE focus continued to remain high on residential and office projects. This trend is expected to continue in 2016 as well. The bulk of this is likely to come from overseas investors.
The Commercial/Office Space
Even though 2015 saw a difficult time for the Indian real estate market, the Indian commercial realty sector performed remarkably well. According to a report, there were some major acquisitions of around 35 million sq ft which is the second highest figure after year 2011 in cities such as Bangalore, Hyderabad, Mumbai and Pune. Demand is expected to remain consistent in the year 2016 as well.
Residential Sector
Again, it was a difficult year for the housing sector too. However, the silver lining is that the bad time seems to have bottomed out. Sales are picking up in a few cities.
Higher consumer confidence, spurred by greater economic activity, lower interest rates, developers’ initiatives like offering attractive schemes and deal terms have activated fence-sitters and would go a long way in driving residential demand.
However, the government also needs to resolve the issues pertaining to the single window clearance system for speedier approvals, land at subsidized rates for development of affordable housing, easy project finance options to developers, etc. Licensing norms have been relaxed in states like Haryana to boost the affordable housing. Currently, unavailability of low cost land is the biggest challenge to affordable housing.
Recovery
The housing loan interest rates are expected to further decrease during the year 2016 and this will benefit home-buyers across all segments. The RBI is likely to ensure that the maximum rate cuts are passed on to the home loan customers. Reduction in interest rates has been a key factor responsible for bringing the positive market sentiments.
Today, the world sees India as a land of opportunity for business and investment. As per recent government data, economic growth reached 7.4 per cent in the second quarter of the current financial year. In 2016, we expect the economy to be on a stronger footing.
2016 will see a shift from investor driven market towards end-user driven real estate market. Even some investors who were waiting for the right time to invest in the sector are changing their strategy now. This is because there is no scope of price correction and an overall improvement in macroeconomic factors.
The gap in demand-supply is expected to remain in balance as there have been very few new projects launched in the past. This should bring down unsold inventories across major cities to a more sustainable level.
Indian Real estate sector has witnessed its share of ups and downs but it is now slowly on the path of recovery. Indian economy is in a recovery mode and the growth in the Indian economy will definitely see favorable result in the real estate sector, as well. The positive mood of economy and various economic and policy reforms announced in the past are expected to enhance buyers, investors and developers’ confidence in the real estate industry in the year 2016. The sector will definitely mature further into an organized industry. Overall, business sentiments will certainly improve . 2016 will see an end to the long sluggishness and the recovery of the Indian real estate market.
Ajay Verma, founder, and writer of The Housing World, a real estate and mortgage news website. He has over fifteen years of rich experience in the above-mentioned industries.
