Performance of Real Estate Sector in India

Real estate in India has been reeling under a slow-down for the past 3 years, with sporadic signs of recovery. The first half of 2016 has also been a mixed bag, however the recovery signs are much stronger and one is looking forward to the return of a positive sentiment with an all-round growth in 2017.


New Project Launches

The overall new launches in 2016 has seen a drop of 9% vis-a-vis 2015. However, if we look at the numbers in 2013, there were 232,490 units launched, this figure has come down to 107,120 in the first half of 2016; a whooping drop of 54%. Almost all major cities recorded a fall in new launches, Mumbai being the only surprise which saw a growth of 29% from 2015. The reasons for this fall are well known, with surplus inventory in all major cities the builders are treading cautiously; secondly, the surplus inventory means lack of capital in the market, for new launches. These trends will take some more years to actually see a reversal and the major cities may not see any, as the growth focus has now shifted onto tier 2 and 3 cities.


Real Estate Market Sales

The lowering of interest rates, passage of the real estate bill leading to the clearance for setting up regulatory authorities, ironing out if the REITs and market correction, are all factors which have contributed towards a 7% growth in sales in the first half of 2016. Bangalore and Mumbai recorded the highest growth of 18% and 23% respectively. However, NCR, Kolkata and Chennai markets saw stagnation. Mumbai real estate market has been gaining ground due to the overall Mumbai Metropolitan Region (MMR) which includes Thane and Navi-Mumbai. Both Thane and Navi-Mumbai have been driving sales due to their affordability. The real estate markets have grown from 29% to 49% in these cities giving a big boost to the MMR real estate market.



The drop in new launches and pick up in sales have helped to reduce the surplus inventory to quite an extend and is the main reason for revival of a positive sentiment in the market.


Mumbai, Pune, Hyderabad and Chennai have seen a 7% and more reduction in surplus inventory which has had a positive impact on the real estate markets in these cities. Mumbai (MMR) has been the biggest gainer which has seen a fall of 20% in the surplus inventory. Another reason for Mumbai’s recovery has been the steady demand for office space in the last one year.


Commercial Real Estate

There is some cheer for NCR as it saw an 8% upward trend in rentals of commercial property. Pune and Bangalore have also seen similar trends. This has resulted in a recovery for the commercial sector which has witnessed an overall growth of 12% in the first half of 2016. The delivery volumes have seena quantum jump from 15.8 million sq. ft. to 19 million sq. ft. in 2016, compared to similar period in 2015.


Tier 2 and Tier 3 Cities – The Growth Drivers for Real Estate in India

The facts and figures which have been discussed are for Tier 1 cities and similar figures are still awaited for the tier 2 and 3 cites, which may be available only by year end. It is very clear that the tier 2 and 3 cities are going to be the growth drivers for the real estate sector in the coming years, with availability of affordable land packets, lower costs and an end user driven market these cities are going to witness a Real estate property boom starting 2017.propchill


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