With half the year or two quarters over, it is the right time to analyse the real estate markets growth and future trends, for the balance of the year as well as coming years. Real estate growth in India still remains a mixed bag. One thing which has happened with the slow-down in the last few years is that the methods of analysis have changed, the markets have become more granular and delinked. This implies that what may be applicable for Mumbai, may not work out for Bangalore or any other city for that matter and similarly what may work for residential markets may not work for the commercial sector. The diversification implies that the method of analysis for the real estate sector also need to change and need to account for more factors.
Today we simply can’t have generally analysed reports based on tier I, II and tier III cities. As already brought out, what may work for one tier I city may not be relevant for another. These generalised analysis and reports have been one reason why the slow-down, its impact and duration could not be predicted accurately in the past. Let’s look at how the India Real Estate websites market is going to be impacted by the economic environmental changes taking place world over.
The Real Estate Market Indexes and its myths
As per the latest RBI Housing Price Index for ten cities the HPI eased to 5.2% year on year in the first quarter of 2016, this includes residential and commercial sectors; it is the worst performance of the sector in the past 2 years. The HPI was at 17.5% during the quarter of 2015, this seemingly gives a very gloomy picture. However, we need to understand how this index is calculated, the initiation of new projects and increase in inventory are the key contributors towards the calculation of the HPI. As one is aware, that due to surplus inventory, non-availability of funds and a cautious builder approach, new launches have been limited to bare minimum in the past 2 years; this is the main reason for the negative growth trend in HPI. Therefore, the HPI and similarly other property indexes do not really project the actual market sentiment and should be viewed like that. Based on the HPI the cities which have done well are Chennai, Bangalore and Mumbai with index growing at 12.1%, 7.2% and 6.8% respectively. NCR has shown the worst growth at 4.1%.
Effect of Brexit on the Indian Real Estate Market
Brexit has had a huge impact on the real estate sector in UK, within 2 weeks assets worth more than 15 million pounds have been frozen, from a total allocation of 24.5 million pounds. All the major players including Henderson Global Investors, Columbia Threadneedle, Canada Life, Aberdeen Fund Managers, Standard Life Investments, Aviva Investors have contributed towards this freeze. Analytic pundits would argue that this has no direct impact on the Indian real estate market, which is true. However, many of the overseas investors for Indian real estate website & market would be affected by this, which would indirectly impact the inflow of FDI in the real estate in india, as market confidence is a major factor for driving investments.
Is the real Estate slow-down in India over?
Every investor big or small has this doubt or question in mind while carrying out any investment today. The market confidence has been so low that even the ‘prediction pundits’ are exercising caution and the wait and watch game is being played by all the affected parties. A general assessment of the current situation and looking into the future one is forced to conclude that the worst might be over. The basic facts are – the Indian economy is on a recovery path with a predicted growth rate of 7.5 to 8%; as far as real estate market is concerned India has a huge end user market which is growing at a steady rate; the urbanisation figures are estimated to grow adding 2 million households every years, which directly effects the real estate sector; government policies like ‘housing for all’, ‘black money bill’, ‘real estate regulatory bill’, enhanced FDI limits for real estate, ironing out of the REITs issues etc are all going to have a positive impact on the sector; the property in india has seen a correction of 5 to 20% from city to city in the last 8 quarters on the trot, the last quarter i.e. Apr-Jun 2016 has generally seen a steady market across all cities and verticals. These are all confidence and economic boosting measures which have a direct as well as indirect impact on the real estate sector.
The Euro Cup Analogy
Probably the Euro Cup is the right example of how the real estate market has performed in the last couple of years; whether the exits of England, Spain, Italy in the preliminary stages or Germany’s unexpected exit at the semi-final stage; Wales unexpected performance; however, nobody had predicted a Portugal and France final – similarly the unpredictability has added more zing, challenge and excitement to visualise as to how the future prospects of real estate in India would unfold. Any bets on who takes away the trophy? May the Protégées defy the home turf advantage and prove their critics wrong!