By: Ravi Sinha
Track2Realty Exclusive: 100 days of governance may be too short a time to evaluate or judge the performance of a government or its impact on any given business. But the Gujarat real estate is so euphoric with the new government at the Centre that it seems they have not only regained some of the lost ground but also carry 100 new hopes ahead.
This optimism is not based on sheer sentiments but the fact of the matter is that slowly but surely the economy seems to be on road to recovery. Moreover, real estate is one sector that has more or less got its due attention by the government in the short period of time, be it the fast track implementation of the Real Estate Investment Trust (REIT) or the prospects of creating smart cities ahead.
Most of the analysts in the Gujarat market believe that real estate is not isolated with the overall economy and hence it has to be seen in the context of the larger recovery. Today there is optimism within the built environment of the sector and that is a positive sign on the eve of the long festive season ahead.
At a time when the global economy is recovering and the investors world over are getting active once again, all eyes are once again on the Indian market where Gujarat is seen as a market that has the proven track record of the ROI (Return on Investments) in the housing investment. This is indeed encouraging for a sector which has shown the best resilience in the wake of overall turmoil in the economy and its after-effects in the real estate.
Of course, the state of Gujarat has not been unaffected by the global recession, and the transactions nosedived drastically. Yet, the property market across the state performed better than the national average. Now when the sentiments are changing with the change of government it is not only on course of a turnaround recovery but also poised to take off for a high flying economy. Historically, the state has been among the first to see boom in the housing sector and overall Bull Run in the business.
Vivek Sahasrabudhe, Analyst – Research & Real Estate Intelligence Service, JLL India believes the fundamentals are heavily loaded in favour of a turnaround in the Ahmedabad city. According to him, to attract the participation of the organised real estate sector, affordable and well-connected real estate developments were on the checklist of the Ahmedabad Urban Development Authority. The planning resulted in well-rounded growth as Ahmedabad, unlike other cities, did not have any geographical constraints on expansion. Also, the committee refrained from giving any specific city node an undue advantage, due to which capital value appreciation was held in check for many years
“In recent quarters, noteworthy growth was registered in residential real estate prices. Residex, the index published by the National Housing Bank covering price movements in urban and semi-urban areas, showed that Ahmedabad residential real estate prices have grown faster than other major Indian cities over the past four quarters. It is true that current market sentiment has turned positive following the country’s recent general election but physical indicators have played a vital role too. The employment opportunities generated by the industrial/manufacturing segment have contributed most to the evolvement of real estate activity in recent times,” says Sahasrabudhe.
Analysts point out that with improved infrastructural facilities, many new manufacturers of automobiles, engineering and instruments have established themselves in the city and existing industries have been expanding their plants, especially on the outskirts of Ahmedabad in Sanand and Changodar. To support the manufacturing hubs, logistics activity has also been growing fast.
Newly generated employment has looked at organised real estate to fulfil its housing needs as prominent developers have been offering small ticket size affordable dwellings in the outskirts of the city.
Another growth driver relates to the fact that Gujarat is part of the Delhi Mumbai Industrial Corridor (DMIC), which is an ambitious project aimed at developing industrial zones. Ahmedabad is anticipated to be an important link in this corridor. The city is expected to create more jobs, attract investment and ultimately generate greater housing needs. There will be no surprise if other cities in Gujarat follow Ahmedabad’s example in the coming years.
Requesting anonymity, another developer points out that it is not just the Ahmedabad market but many other market in the state like Vadodara, Surat etc are also poised for big time growth. The market sentiments have completely changed in the last 100 days and it seems the festival sentiments ahead will be the beginning of a real estate turnaround along with the economy getting into a bullish era.
“All the macro-economic indicators suggest there is a visible sign of revival, inflation is in control if not completely down, and most importantly, the twin deficits are also in control. With a growth-inflation balance, the all important market sentiment has also revived considerably and the business confidence index suggests growing optimism is there in the market. Statistics also point to some tangible positive outcome in the last few years post the formation of a new Government at the Centre,” says the developer.
However, it is equally essential to understand the mindset of an average home buyer. Are they willing to invest in the Gujarat property market? Whether they also feel turnaround in the economy in the last one quarter? What has changed their outlook, if at all it has been? There are many questions that need to be addressed, failing which all positive direction of the economy will be mere statistics.
Gulshan Patil, an IT professional from Mumbai is planning to buy a house in the Ahemdabad city. He waited for long due to weak market sentiments but is now ready to book an apartment during the Navratri. According to him, there is a visible change in the outlook of the home buyers in the last 100 days and there is hope that the economy will only go up from here onwards. The phase of gloom and doom is over and that is what is essential for salaried home buyers before committing for a long term property investment.
“There are three things that are critical to an average home buyer like me. First is the job security as it normally is a 20 year long payment; second is inflation in check and third is interest rate. I feel the job security is back in the market; inflation will not shoot up further, even if it does not go down; and finally interest rates are going to be lower as the RBI Governor also recently said. So, in totality this makes the right time to buy as further economic recovery may see the property prices appreciate as well, says Patil.
In a nutshell, the sentiments have no doubt changed for better across the state of Gujarat. The financial analysts also maintain that Gujarat is one critical state in terms of retail investment that is taking the Sensex higher and higher. So, the hopes of better market conditions ahead is not sheer optimism but based on sound fundamentals; something that is definitely a magnet for the investors as big ticket funds, both domestic and foreign, bet high on the Gujarat market which is once again back as one of the most lucrative investment magnet.
