First half of the year may maintain status quo for realty and improve thereafter in the second half
By SANJAY DUTT, CUSHMAN & WAKEFIELD
The slowdown in the Indian economy continued as the Reserve Bank of
India revised the real GDP growth rate forecast for 2013-14 downwards to
5.0% from 5.7%. Economic slowdown has had an impact on the end-user
sentiments that has impacted the absorption of residential units
ultimately leading to a slowdown in the values. The strong headwinds
that the domestic economy has been facing since the last year due to
structural issues like high fiscal and current account deficits, and
delay in reforms are expected to remain until the general elections next
year.
As a result, the first half of the year may maintain status quo and improve thereafter in the second half. The looming scenario of tapering of the US Fed's liquidity infusing Quantitative Easing programme in 2014 could result in investment outflows as was seen earlier this year and dictate the currency fluctuations in India, affecting all policy on tightening of interest rates to protect the rupee in coming months.
In the residential real estate sector, select locations may witness healthy activity and garner good response from developers, investors and end-users alike due to ongoing infrastructure developments such as metro rail and mono rail connectivity, construction of flyovers, inner and outer ring roads, which are at various phases of construction in Bengaluru, Chennai, Mumbai and NCR.
Overall residential markets are expected to witness stable capital values except for those developments that are over leveraged and are not able to attract sales. Such developments and or locations are expected to see some corrections downwards. These are especially expected in locations / developments in Mumbai and NCR where margins of correction are higher. Southern cities will see stable rentals with a downward bias in oversupplied and peripheral markets.
Some developers may continue to struggle with liquidity issues and be forced to offer some discounts and/or freebies to boost sales. Further, the implementation of various reform measures like the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 and the proposed Real Estate (Regulation and Development) Bill 2013 will see increased participation from all stakeholders like government, developers, real estate service providers, and investors alike.
The main watershed for this will be the upcoming 2014 general elections, and the improvements thereafter will largely depend on the ability of the new Government at the Centre in bringing about strong structural reforms for the stability of the economy.
As a result, the first half of the year may maintain status quo and improve thereafter in the second half. The looming scenario of tapering of the US Fed's liquidity infusing Quantitative Easing programme in 2014 could result in investment outflows as was seen earlier this year and dictate the currency fluctuations in India, affecting all policy on tightening of interest rates to protect the rupee in coming months.
In the residential real estate sector, select locations may witness healthy activity and garner good response from developers, investors and end-users alike due to ongoing infrastructure developments such as metro rail and mono rail connectivity, construction of flyovers, inner and outer ring roads, which are at various phases of construction in Bengaluru, Chennai, Mumbai and NCR.
Overall residential markets are expected to witness stable capital values except for those developments that are over leveraged and are not able to attract sales. Such developments and or locations are expected to see some corrections downwards. These are especially expected in locations / developments in Mumbai and NCR where margins of correction are higher. Southern cities will see stable rentals with a downward bias in oversupplied and peripheral markets.
Some developers may continue to struggle with liquidity issues and be forced to offer some discounts and/or freebies to boost sales. Further, the implementation of various reform measures like the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 and the proposed Real Estate (Regulation and Development) Bill 2013 will see increased participation from all stakeholders like government, developers, real estate service providers, and investors alike.
The main watershed for this will be the upcoming 2014 general elections, and the improvements thereafter will largely depend on the ability of the new Government at the Centre in bringing about strong structural reforms for the stability of the economy.
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