Real Estate in India, requires a Demand Based Approach

The real estate website in India continues to reel under a slow-down despite the Indian economy showing signs of recovery. The real estate website in India unfortunately refuses to carry out introspection; and keeps looking towards the government for some kind of a relief package or for a bail out.

The real estate sector in India used to follow the supply and demand model while initiating new projects, however over the past few years due to higher anticipated gains builders initiated construction arbitrarily, in locations where the demand was limited or saturated. The sector followed the principal ‘build whatever and wherever one can’. The real estate sector in India is still marked by developers who build depending upon their financial strength rather than using some analysis to anticipate demand and then follow the demand cycle.

Another perspective which the developers have lacked is to establish a connect between location and the segment. Every city and localities within it have a segmental flow and can be classified into affordable, mid or luxury segment of accommodation. The real estate development in an area needs to follow that pattern so as to ensure it creates the right fit for the area.

The real estate industry in India needs to initiate construction or planning of projects based on analysis, which looks into estimated demands, the micro market, historical patterns, economic modelling, future developments and is need based.

Property in India remains an emotional and ego based issue for families and society at large; therefore, the process of buying a property, whether for investment purposes or self-use goes through a due diligence cycle. This implies that developers cannot build ‘anything they want and anywhere they want’, such a system is bound to fail in Indian society; this is what exactly has happened. Today, the real estate sector in India is reeling under surplus inventory, whereas there is an overall shortfall in the housing sector. This surplus inventory means lacks of funds in the market and implies non-availability of capital for real estate projects in other parts of the country where the demand exists. It is a catch 22 situation through which the real estate sector in India has to negotiate.

The outcome of this slow-down are very clear; the real estate industry in India needs a mid-course correction and a fast one. A few smaller developers who are unable to handle the present recession, will be gobbled by the bigger players, this would enable inflow of capital in the sector and initiation of new projects as per the market demand. This cycle would ensure a resurgence of the real estate in India. The whole cycle is likely to take another 2 years.

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