Real Estate Demand On A Growth Path !!

Real estate in India: Through dark days

Real estate in India has been going through a lean patch since the last few quarters. 2012 had been a distressing year for the reality sector, fraught with dropping sales and increasing number of unsold homes. However, with festive spirits round the corner, weather is looking to brighten up for the sector.

In 2012, real estate transactions in ten major cities in India – Delhi-NCR, Mumbai, Bangalore, Kolkata, Chennai, Hyderabad, Pune, Ahmedabad, Cochin and Chandigarh, have remained stagnant. High interest rates and inflationary pressures have strangulated real estate demand and residential absorption came down by 6% on an average on a year-on -year basis in 2012. Developers also went slow with project launches as a reaction to sluggish sales.

Current reality scenario

New launches are starting to creep up after a lull. At present there are 492 new real estate projects being offered in Mumbai. Of the 492, almost 120 are in ready to move in condition. The number of properties on offer stands at 539 in Delhi-NCR, 536 in Bangalore, 331 in Pune and 387 in Chennai.

Big developers are launching high end luxury apartments in the top cities, with developers looking to cash in on high margin in high end projects. It is a considerable departure from earlier trend of concentrating more on affordable market.

However, considering the still grappling economy, the money that has to be paid upfront while buying a home has remained low. The 80:20 model is in vague where the buyer needs to pay only 20% of the property price till the home is ready to move in.

Real estate market provides good opportunity for investors as developers are coming up with pre-buying offers in cities like Delhi and Mumbai. A total of 517,365 units are expected to be delivered in 15 cities this year.

Future demand for real estate

With the economic landscape of the country improving gradually, a 5%-7% rise in absorption level is expected in 2013. Accordingly, despite battling slowdown, the reality projects seem to be back on a roll in the Indian cities. The developers are coming up with various festival discount offers and pre-launch offers. Records show that the first three months witnessed growth in new launches across the cities.

Investor ridden markets of Delhi-NCR and Mumbai holds the key to growth of real estate in India. During 2013-14, around 840 million sq. ft. is pegged to get absorbed across the major 10 cities. Of the total absorption, NCR and Mumbai will account for nearly 58 percent. Till 2015, a total supply of 1.5 to 2.1 billion sq ft space is expected; of which NCR and Mumbai will account for 43% and 13% respectively.

Analysts have predicted an average price rise of 6-7 percent on year-on-year basis in 2013 in the top 10 cities. In the coming two years, improved demand for real estate will see the highest price rise in the cities of NCR, Pune and Hyderabad. While Pune is expected to witness a compounded annual growth rate (CAGR) of 9% till 2014; Hyderabad will grow at CAGR of 10%. NCR and Mumbai will also see a CAGR of 8% till 2014.

Improved macro economic scenario will propel the developers to resort to innovative tactics to push sales and as buyers come out of their ‘wait and watch’ mould, real estate seems to be moving towards a brighter tomorrow in India.