Indian real estate market is expected to do better in FY 2013-14 than it did in FY 2012-13, despite of current slow down; says real estate developers and consultancies and other market experts. Compared to 2012-13, the year ahead is promising for real estate companies particularly for those that offer low-cost flats. This is because of the increased employment opportunities and inflow of qualified and skilled professionals in the NCR where they look for jobs.
Residential real estate market in India struggled in year 2012, with changing macroeconomic environment that kept potential buyers and real estate investors in wait and watch mode. High interest rates, rise in labour cost, and inflation that continued to impact buyers sentiments; altogether these factors led to fall in sales in Indian property market. However with changing scenario, reduction in interest rates and with expectations of improvement in macroeconomic conditions the demand in residential property market is expected to rise.
Not only residential, even in commercial property segment too, office space and office rental will see a hike within this year as overall economy is expected to fare better and rentals have already bottomed out. From these levels the rentals should increase.
However according to reports by Cushman and Wakefield and Nomura, in the returns could be in the range of 10-20% in 2013-14, unlike 2012-13, when the returns from residential real estate were in the range of 30-40% in various cities of the country. Returns from real estate in 2013-14 will take a beating because of a slowdown in the economy, Cushman and Wakefield said in a report.
Sentiment of a cautious buyer and investor is setting in across most micro markets in all cities, though a sizable number of units targeted at affordable and midrange segments are under construction and more are poised to be launched in suburban and peripheral locations of cities, even as the inventory of unsold units is piling up. The increase in the inventory of unsold property is putting downward pressure.
However there are still some locations within cities like Gurgaon and Delhi NCR, which are registering strong sales due to high demand and limited supply and these, will continue to record some growth in prices in the next one year.
Sonal Varma, the chief economist of Nomura Securities in India, in a report said that given the elevated house prices, subdued job markets and lower household incomes, real demand should remain subdued. Consequently, in the absence of real demand, investment demand alone may not be able to sustain the excess return in metro cities, she said.
However, Simon Rubinsohn, the chief economist of RICS, said that the backdrop for the real estate sector remains broadly supportive with macro indicators likely to show some modest improvement over the course of the year and interest rate policy geared towards further, albeit only limited, accommodation. Critically, inflation should continue to trend lower helped by a combination of the sub-par growth environment and the flatter outlook for commodity prices.
Reflecting this, we anticipate the picture for real estate investors through 2013-14 to be largely constructive. In the commercial property arena, this is already being reflected in a pick-up in investment inquiries both from domestic and international businesses which, in turn, is fueling some level of optimism about the likely pattern of capital values. Outlook for residential property is also generally favorable within the context of the current challenges facing the economy.
Info Source – Print Media
Alok Kumar Upadhayay