Impact of Global Market on Real estate in india – A Perspective

The continuation of a slow-down in real estate sector in India is a matter of grave concern not only for the industry but also for the government. At present Real estate in India contributes 7% towards the GDP, this percentage is estimated to increase to 11% by 2022. The global real estate market was shaken by the financial crisis of 2009. The Indian real estate sector however was not affected and the slow-down started only in end 2012. The recovery in global real estate market started in 2013 and as per CBRE report 2015 saw a healthy growth rate of 3.7% annually. The figure below highlights the recovery from the negative growth rate of 4.6% in 2009.

 

It is estimated that the global real estate market is likely to grow strongly in the coming years. The multifamily investments (what we call as apartments in high rises in India) in USA have shown a growth rate of 15% in 2015. Despite a slow-down in the Chinese economy, Shanghai saw a growth rate of 6.2% in the real estate sector. The real estate sector in India may not be directly connected with the global market, but neither is it disconnected.

 

Real Estate market in India is primarily driven by the end user, where the sentiment has been lacking and investors have been shying away. Government has given a huge push to urban development through a number of initiatives; probably the most important aspect which is going to start the real estate recovery engine is ‘job creation’; unless you have jobs the market is denied the liquidity, which is essential for driving any economy and kicks of consumer spending. Luckily for India there lays the bright spot; Indian economy was estimated to grow at 7% in 2015 and did well to surpass that by growing at 7.4%. The figure below illustrates the estimated private consumption growth for 2016 and India is on top, tipping of China, which is huge confidence boosting indicator of things to come.

2017 may just be the year of reckoning for the Indian real estate market. Over all till the second quarter of 2016, the southern cities have done well and have shown tangible growth rate, with Hyderabad leading the pack; Cities in north India are still to come out of the slow-down and have not shown any signs of recovery. Comparatively between the residential and commercial sectors, office space in certain cities has shown enthusiasm, however retail space market remains dull. Demand in the office space market is an indicator of creation of jobs and as brought out earlier is the initiator for market recovery. Therefore, hopefully 2017 will set-in an upturn and real estate market property trends in India would be back on track.

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