Real Estate Market Of India in 2015: A Perspective

Real Estate Market Of India in 2015: A Perspective

Real Estate Market Of India in 2015: A Perspective

Published on: Dec 31, 2015 @ 19:11

The year  2015  has  been  an  eventful  year  for  the  Real Estate  Sector  of  India.  A  long awaited demand  of  the industry  was  met  by  the  Union  Cabinet  of  India,  which  cleared the Real Estate  (Regulation  and Development)  Bill, 2015.  Besides,  the  RBI  had reduced its repo rates  ( a rate  at  which  RBI  lends  to commercial  banks)  four  times  in  the  year 2015.

Year  2015  also  witnessed   many  ups  and  downs  in  the  real estate  sector. The  market  was seen  reeling under sluggish  demand. Both  investors  and  home-buyers  mostly  preferred  to stay away  from  the  market. It is  said that  the  real  estate  sector  is  again  going  through  a slowdown  but  the  year  2015  also  saw  a rise  in the demand  for  office  space.

The  first  half  witnessed  no  big  sales  happening  even  though  there  was  an  adequate   supply in  the  market. While  the  short-term  investors  were  more  or  less  out  of  the market, the long-term  investors  also  preferred to stay  away  from  the  market  because  of  their  previous  bad investments  experience. As  far as  the  end  user is concerned,  he  has  become  more  rational and very  cautious. Due  to  this  reason,  market  is  witnessing  the missing  link  between demand and supply.

Residential  sales  was  slow  in  most  real  estate  market  but  it  also  depended  upon  the  track record  of  the builder  and  his  promises  of  delivering  the  project  on  time  and  maintaining the good  construction  quality. There  was  still  decent  sales  in  the  year  for  them. We  have seen only  big  developers  with  good  track record on  delivery  and  construction  quality commitment succeeding  in  their  launches. Today, only  those  players can operate  in  the  market that  have good  financial  backup  and  experience.

The  home-buyers, who  are  increasingly  getting  smarter, are  probing  more  as  far  as  the builders’  past performance  is  concerned. Home-buyers  have  become  more  mature  to understand  the  gimmicks. A  report points  the  weakened  sentiments  of  home-buyers  who  have been  stressed  with  delay  in  delivery  and  are now being  extra  cautious  while  buying  their home. Now, they  are  likely  to  get  more  attracted  to  a developer  with a good  project  and timely  delivery  record.

Year  2015  saw  Reserve  Bank  of  India  reducing  its  repo  rates  four  times. Despite  the  cuts  in the  repo rates by the  central  bank  and  some  reduction  in  lending  rates  by  the  lending  banks, there  has  been  no significant  rise in  home  purchase  in  the  year  2015  and  the  real  estate sector  remained  under  stress.  A report  says  that there were  marginal  rise  in  sales  in  the second  half  of  the  year.

Year  2015  also  witnessed  Real  Estate  Regulatory  Bill  getting  clearance  from  the  Union Cabinet  and expected to  be  passed  from  parliament  in  the  near  future. The  bill  allows  the formation  of  Real Estate Regulatory Authority,  who   would  look  after   discrepancy  in  the sector. The  government  seems  to  becoming more receptive  to  issues  raised  by  the  real estate industry  but  there  are  some  project approval  and   taxation   related  issues  which  need  to  be resolved  by  the  both  central  and  state   governments.

As  the  sector become   more  organized  and  moves  towards  attaining  transparency  and  accountability  due  to the  bill, developers  need  to  perform  well  to  stay  in  the  market. The  bill will  bring  transparency  and  create a more credible  environment  for  buyers  and  also  put  pressure  on  builders  in  terms  of  complianceThese steps will surely  increase  buyers’  faith  in the  market.

The  year  2015  also  witnessed  developers  across  the  country, go  slow  on  launching  new projects  and instead focus  on  completion  and  delivery  of  existing  projects. Both  the  launch and  the  sales  numbers  are  at  a  low. Even  the  premium  segment  of  the  residential  housing market  was  no  exception, which  is  considered  to  be immune  to  the  slowdown  in  the  real estate  market.

It  is  also  evident   that   sales  are  not  happening  at  a  brisk  pace  across  the country. According to  a  report,  projects  spread  over  1.1  billion  sq.ft. or  32  per  cent  of  total residential  space under  construction  across  25 cities  have  been  delayed  for  more  than  a year.

As  investors  are  less  attracted  towards  real  estate  due  to  various  reasons, developers  should change  their marketing  strategies  and  offer  lucrative  schemes  to  lure  actual  buyers. The marketers  need  to  derive  a long term  strategy  for  the  actual  home  buyers  to  bring  them  out in  the  market. Earlier, It  was  a  investors driven market. Now, it  is  gradually  becoming  an actual  buyers’  market.  Indeed,  this  is  a  good  sign  for  the real sector altogether  in  the coming time.

The  sector  may  take  some  more  time  to  improve  because  of  the massive  amount  of inventory  that  has been built  up  over  the  last  few  years. This  inventory  may  take  some  time to  get  absorbed  depending  on  the builder’s  marketing  strategies  and  other  macro-economic factors. It  has  been  seen  that  the  absorption  rate of the  year  has  been  considerably  low. At this  low  absorption  rate,  the  recovery  may  take  some  time  as the unsold  inventory  will  take some  time  to  get  exhausted.

The  end  users  are  certainly  going  to  get  benefit  out  of  all  these  developments. The measures taken  by  the government  and  the  RBI  would  soon  start  showing  their  effects  and would benefit  the  entire real  estate sector.  Real  estate  sector is  sure  to  come  out  of  its  shell and establish  its  own  credentials  in  the market. The real  estate  in  India  is  passing   through  a transition  period  as  well  as  a  consolidation  phase  and is certainly  going  to  make  its  mark as  a  big  contributor  to  the  GDP  of  the Indian  economy.

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