Indian real estate sector 2016

In present, the rest of the world is considering our country as the land of opportunity for investment and business.  If we are talking about the real estate scenario for 2016, so no doubt it could be great year for residential as well as commercial projects.

1. Residential Properties:

It is expected that year 2016 will not bring some great hope for the residential sector as demand will remain constant. However; we can expect that silver lining will shine more and bad days of the real estate segment will be bottomed out; as according to reports in some cities sales have picked up and these cities are; Mumbai, Hyderabad and Bangalore. However; you can expect less launch in the cities such as; Mumbai as inventory level is already high. Real estate developers initiatives such as; attractive schemes, freebies, deal terms and heavy discounts with lower interest rates by RBI have activated fence-sitters. It is expected that year 2016 will end the long and painful journey of real estate market and signal an upward growth trajectory. It will definitely mature further into an organized industry in which some lesser- organized players become casualties.

2. Office or Commercial Properties:

The absorption rate of commercial properties as well as office spaces are still at 35 million sq ft and it is second highest figure in the history of country after the year 2011. However; the PAN India vacancy is still at the 16 percent, whereas; the realistic vacancy actually stands about 8 to 9 percent. It is expected that in the year 2016 the demand will remain consistent as occupiers are showing a positive bias. The years 2016 will bring more demand for leased spaces however; the quality supply will be lower. It means in year 2016 we can expect higher occupancy for Grade-B office spaces.

3. Retail Properties:

In 2015, there were no launch for the quality retail space and the major trend which we observed in the year 2015 were; the consolidation of retail real estate by retailers and big brands are focusing on the profit making stores and they are closing down the loss making stores. These days there are more institutional investors and all credit goes to relaxation of sourcing norms as single-brand retail companies are able to explore the Indian market. It is expected that years 2016 will be good year for the retail investors as there are many ecommerce companies which are planning to set up their retail stores in near future. Retailers will have to revisit their real estate strategy and have a flexible approach, customized to different micro-markets.

Capital Markets:

The year 2015 was the interesting year for capital market activities in the real estate market as PE focus continued to remain high for the office and residential projects. The platform-level deals and entity-level investments are also came into the limelight as the level of confidence are increasing among the investors.  The income yield of the office projects are attracting the majority of equity investments and when it comes to the geographical spread, so we can say that tier I and tier II cities are good for the investment in the offices spaces because over there you can earn more rent.

Real Estate Sector

Real estate experts believe that the 2016 will start with the positive note for real estate sector and in coming year it may witness pickup in the sales with improvement in the number of unsold inventories. In simple words we can say that year 2015 was little bit good for realty sector as it has witness some  regulatory changes, which will do the big impact in year 2016 as regulatory changes have relaxed the foreign direct investment laws, after the direct approval of Union Cabinet and it was much awaited Real Estate Bill. On Real Estate Bill there were mixed reactions from real estate experts, but broadly everyone sees it as a positive move as currently real estate sector is in sluggish mood.

As per real estate experts, In September the rate cut of 50 basis points by the RBI under monetary policy review will also increase the demand and supply in the real estate sector as well as government panel is also planning to bring seventh pay commission. As per the reports of Financial Express, “Investment in the real estate sector in 2015 was about $ 8 billion or Rs 53,000 crore and it was even year high even when the sector is not in a good shape. However; BSE Real Estate index also plunged by more than 16 percent on a year to date basis at the December 18. According to reports of Cushman and Wakefield private equity players have invested about $ 2.8 billion or Rs 18,700 crore in the real estate market till end September 2015. Add to that estimation $ 4.5 billion, or Rs 30,500 crore was of NCDs till the end of November 2015 and due to that the overall tally was up by 74 percent in comparison of last year which was about Rs 17,600 crore.

As per the statement of Anuj Puri, Chairman and Country Head of JLL India, “In past two years the real estate market is seeing some improvement and it has been adjusted to new trends in terms of aligning supply for relevant demand. The more he added that now real estate developers are paying more attention to the requirements of buyers and they are developing more property as per need of middle class which is in the price range of Rs 75 lakhs to Rs 90 lakhs in tier-I cities”.  According to Vikas Malpani, co-founder and Head of CommonFloor Groups, “The real estate bill approval is positive sign for real sector, which along with other trends could shape the real estate sector in 2016”. There are many experts, who are giving thumps up to the recently approved Real Estate Regulatory Bill as it can be helpful to clear the unsold inventory. We all know that whenever any new bill or law comes in the existence, the real estate developers tend to adopt a wait and watch approach. And due to that in present, the completions of existing projects are the prime focus of developers for some more months.

On the other side at the positive note the developers are focusing more on completing their existing projects as well as clearing the inventories and according to JLL India listed that following regions as the best bet for real estate sector in 2016; Noida & Greater Noida, Thane – Mumbai Metropolitan Region (MMR), National Capital Region (NCR), Nagar Road – Pune, Whitefield – Bangalore, Navi Mumbai – Mumbai Metropolitan Region ( MMR), Viman Nagar and Kochi.

Festive season offers

If we will look the business of real estate market at the time of festive season, so we will find that developers and the consultants are on the same side because they are accepting that it will continues to go through a slow time. There are many real estate developers in country which have strong financial support and they tend to challenge or complete the convincing progress of real estate market with their under-construction projects. Unfortunately fact this has been overly hyped by the media and real estate developers that they have strong financial background and they are able to complete their projects on time. But still there is drop in the overall confidence of end buyers because they are worried that if they will commit their money into properties which will not be delivered on time, so it could be problem for them.

Price Correction in Projects:

In last one year, the prices of property in Mumbai has been increased by 3.7 per cent, in Chennai its increased by 15 per cent, but in Delhi or NCR no change recorded in the price of property. All this rise represents the more or less stable scenario and it is expected that it will continue for another 2 or 3 quarters as there are many fence-sitting buyers, who are waiting for the time when real estate prices get correct. But according to real estate experts price correction will be location specific as well as developer and will happen only if there will be nothing to attract the buyers. There are few cities where demand is still sufficient and prices are more or less affordable and in those cities there will be no price correction. Apart from that the regions where people looking for more affordable property certainly price correction will happen in those areas. However; there are much activity to make the real estate market more affordable because developers are actively re-configuring their projects as per market conditions in process to save the cost and pass the benefit to buyers. Much number of real estate projects are about to launch and they all have been at lower rates than those of earlier projects launched in the same locations in such category projects.

Economical Scenario:

In present, economy has not shown any type of perk for which real estate developers are waiting. However; market has definitely improved in comparison of last year. But market is still improving and recently, RBI as cut the interest rates to help the sentiment of buyers and it is expected that it will be factor to drive more sales in real estate market. With the cut in interest rate, the RBI has sent the signal to the real estate market that inflation is under control and buyers and developers can be more confident about economic growth. However; these kinds of signals are positive for buyers and developers as well. If you will show the actual pertinence on property purchase, so it could draw big impact on the savings because impact may not be very significant, in expensive regions such as; MMR, NCR, Delhi and more. If property prices will be expensive in any case, then marginal reduction in the cost of borrowing will not make any big impact. However; the reduction in interest rates will draw a bigger impact on the buying behavior in less expensive markets such as; peripheral locations of tier I and tier II cities.

NRI Investment:

If will take a step towards the domestic real estate consumption and analyze the demand and supply ratio in metro cities so you will understand that outlook looks very upbeat. In present, there are many non-resident Indians (NRIs) who are extremely active while investing in Indian real estate market. In India, NRIs are among top five investor communities who are investing in countries property sector. Apart from that there is natural affinity to India that NRI with high intrinsic value prefer to buy property in India than buying property anywhere else in world. However; sometimes due to weaker rupee value NRIs prefer to invest in India.

This festive season it is expected that buyers will see the mixed bag, but still question remains same, is it a good time to buy? Definitely yes, for end buyers because they have never been more spoiled for choice with bargaining power and lower interest rates. There are many real estate developers who are offering hard discounts registration charges and waive on stamp duty, VAT service tax and on other services such as; floor rise premium, free parking space and more. This festive season is an ideal time to make the best deal of your life and turned your dream home into a reality.