The residential real estate market, after a couple of years of sustained sluggishness, has shown a great deal of improvement in the first quarter of 2016 – Jan to March. International property consultant agency Jones Lang LaSalle, in its latest data on India, indicates the sales in the residential homes sector has risen by 9% at 42,521 units in the first quarter of 2016, up from 39,001 units the same time last year.
It estimates that the real estate sector witnessed the worst phase in 2015-2016 with sales and prices plummeting down to an all new level. High inventory levels, diminished demand, and limited liquidity were among the factors that impacted new launches. The JLL report forecasts a change in trends based on the expectation of a good monsoon, a revival in the economy, reduced inflation and the fact that residential prices have bottomed out.
Certain Government schemes like smart cities, AMRUT, and ‘housing for all by 2022’ are beginning to exercise a positive influence on the residential real estate market. Another important factor is the factoring in banks’ passing on interest rate cuts to customers, thereby creating more leeway for investment.
Mr. Om Ahuja, residential CEO at Bangalore based Brigade Enterprises pointed out that with over 11 million office spaces leased in calendar year 2015, he expects over 1.1 lakh new jobs and believes this momentum will continue for the next four to five years in Bangalore.
Mr. Suresh Hari, secretary of CREDAI, Bangalore, said “The first quarter sale is the good indicator of the overall growth during the first year. The sign of good monsoon and possibility of GST being rolled out creates better market sentiments. The overall economic situation is looking up across all sectors and it will fuel better pick as the year progresses. Many elections have been completed and surrounding uncertainties have been cleared and this will fuel better growth on all fronts.”
He also added, “The high level of taxation is the primary concern of the sector. Ultimately this fuels price increase and subsequent demand fall. With the expected GST implementation, better sentiment prevails. The RERA bill will usher in better confidence among the investing public. The challenge is on the management of the act. The rules when framed and authority appointed, the necessary process will start. We are sure the rules will be framed in a manner that is fair to all stakeholders.” He also indicated that the market sentiment is fast improving and it is likely to expect a good pick up in the second and third quarters.
An upwardly mobile rapidly changing real estate sector requires various catalysts at work, like metro rail connectivity, which increase land value. Experts believe that rising optimism emanating from efforts to increase affordability, stimulate economic growth, along with subtle reforms by the government would be likely to result in higher enquiries for residential purchase.
Mr. Ganesh Babu, Director, IDE Real Estate Consulting Services said, “Interestingly, 2016 had started on a sunny note. The residential real estate market, which had witnessed a slump in project launches in 2015, showed a visible comeback in the first quarter. There was a six-fold increase in launches of the affordable housing projects, as developers predicted greater demand in this highly price-sensitive segment. One way or the other, factors have now transpired to make residential real estate a buyer’s market that gives buyers the upper hand. They have a lot of options to choose from, with the added benefit of flexible rates and attractive payment plans.”
He added, “The developer should focus on the type of clientele profile he is targeting, i.e. Local or NRI/investor. If it is a local client, it has to be affordable housing in order to fit in his budget. In case of NRI/investors, the developer has to assure a price appreciation, which can be difficult in the present scenario.”
Mr. Cyriac Joseph, vice president of Vaishnavi Group said, “Going by recent trends, overall positive sentiments and customer response, there is good reason to believe that the sales will indeed continue to improve over the next few quarters. Amongst others, the recent buoyancy seen in the office space segment will drive this momentum. Project delivery will be a key factor and will bolster customer and investor confidence. This in turn will signal better and faster home sales and possibly a spurt in launches in some key markets. Overall, there is expectancy of consolidation followed by a gradual increase in prices.”
He also pointed out that this current period is as good a time as any for residential real estate consumers to make that all-important purchase decision, and that the recently introduced Real Estate Regulation & Development act will definitely boost customer confidence.