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Tuesday, July 05, 2016
Real estate market may be on revival path, says report
In the first half of the year, home sales in top eight cities rose 6.6% from a year ago, unsold inventories declined 7%
Mumbai/New Delhi: 05 July 2016: The Indian real estate market, which has been in a slump for the past three years, could be on the path to recovery, property consultant Knight Frank India suggested, citing better home sales and lower unsold inventories in the first six months of 2016.
In the first half of the year, home sales in the top eight cities, including Mumbai, the National Capital Region (NCR) and Bengaluru, rose 6.6% from a year ago, while unsold inventories fell 7%, according to a Knight Frank report released on Monday.
During the period, 135,000 homes were sold, while unsold inventory fell to 660,000 units from 710,000 units recorded in the first half of last year.
Mumbai and Bengaluru registered the maximum growth of 23% and 18%, respectively.
The report also pointed out that new launches fell 9% in the six months to 107,000 units as developers focused on selling stock before bringing new inventory into the market.
“For the first time, after two successive H1s (first halves), we are seeing a point of inflection in the residential market. After two consecutive falls in H1, for the first time, in the all-India aggregate market, we are seeing an actual uptick happening. So the point here in question is: are we seeing the worst behind us and are we now on the path of sustained growth?” said Shishir Baijal, chairman and managing director, Knight Frank India.
Measures such as the Real Estate Regulatory Act (RERA), the recent amendments to real estate investment trust (REIT) norms, a correction in prices in most markets and a lowering of interest rates in the past six months have helped in improving the overall sentiment of both investors and homebuyers in the country.
However, NCR, India’s largest real estate market, continued to struggle.
During the period, home sales in NCR declined 3% while new launches fell a record 41% from the year-ago period.
According to the report, NCR home prices fell by 4% in the first half of 2016, the first time in three years.
The report attributed the price correction to cash-strapped developers, high inventories and a trust deficit among customers.
“NCR is an investor-driven market and investors are out of real estate because prices are not rising,” Omaxe Ltd’s chief executive Mohit Goel said, adding that in the next four years, real estate will be a clean sector.
Commercial real estate continued to show positive momentum during the January-June period, with transactions rising 12% to 20 million sq. ft, while average rental values across the top six cities rose 8% from a year ago.
The report also forecast that total absorption of office space is expected to touch 42.7 million sq. ft, up from 41 million sq. ft by the end of this year, led by manufacturing and information technology(IT)/IT-enabled services.
However, e-commerce companies which have lapped up office space in the last two years have lost steam, with transactions in the segment falling around 78% during the period.
Baijal said commercial real estate has grown from “strength to strength” and if the same positive momentum continues, “2016 is poised to become the best year after the global financial crisis in 2008”.
In the residential segment, while new launches in the Mumbai metropolitan Region (MMR) grew by 29%, sales saw a jump by 23% during the January-to-June period.
Unsold inventory in the city was also down by 20% in the last two years, with a few micro markets in the suburbs of the city like Thane and Navi Mumbai continuing to show significant improvement in sales, particularly in the mid-income and budget segments.
“The new draft development plan that was released recently has brought a lot of clarity for city-based builders. Plus, robust office space demand and enhanced infrastructure are boosting demand for residential real estate in Mumbai. We forecast a 16% growth sales in Mumbai in 2016 over 2015,” said Samantak Das, chief economist and national director at Knight Frank India.
Most developers remain hopeful of the real estate market picking up further with a good monsoon and more policy reforms kicking in over the coming months.
“We are very hopeful that with the monsoon and GST (goods and services tax) coming in, the real estate market is going to do better and, by Diwali, we should see a stable market. Homebuyers have also realized that this is as low as home prices can go. They are actually going forward and closing deals. The only thing is that they are choosy about the developers and the budget but the bottom line is that transactions have started happening,” said Getamber Anand, president, Confederation of Real Estate Developers’ Associations of India, a real estate lobby.
Courtesy: Live Mint