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 compliance. These 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.
Ajay Verma, founder and writer of TheHousingWorld, a real estate and mortgage news website. He has over fifteen years of rich experience in the above mentioned industries.