1st of a series of 2011 forecast
By: Ravi Sinha
If 2008 was the year of shock, 2009 the year of discovery & introspection and 2010 the follow-up experiment; the year 2011 promises to be the year of comfort level for the Indian real estate sector. It seems the turmoil of the last couple of years has made everybody come out intelligent–investors, developers, bankers and end users. While the critical approach by all the stake holders is a sign of the maturing of the sector, the number of speed breakers ahead with increasing input costs, commodity & oil prices, overcautious foreign fund inflows and troublesome balance sheets of many of the developers clearly indicate that mayhem is far from being over.
The year 2011 promise to be the year of comfort level for the Indian realty, however, is more due to the guarded optimism of the realty consultants, developers, investors, bankers and end-users. Sunil Dahiya, Managing Director of Vigneshwara Developers asserts that credit reliability and brand reliability are going to be differentiator for the sector now onwards. “With strong collaterals there is more stable money flowing into the sector with a long time horizon and investors are not crazy for short term returns. With India being the most safe investment option, I see long term investments like pension funds coming into the sector.”
Will it help the sector regain its lost ground? A senior official of Ansal API believes it will. “With the economy expected to grow by 8.5-9% and an average increase of 20% in salary levels being projected by HR surveys for 2011, the realty sector is expected to do much better than 2010. While in 2010, the industry was mostly doing ‘catching up’ after two bad years, 2011 will see a significant increase in various asset classes including realty across various segments. There has been a clear shift in the market of late, with the actual users constituting a majority of the buyers. In 2011, the trend is not only expected to continue but is expected to consolidate in favour of end users,” he said.
Sanjey Roy, DLF Spokesperson agrees to it. “With the Indian economy improving & global market also strengthening, the year 2011 will see the Indian real estate improving in all the segments. In the residential vertical the more demand and less supply indicates a price appreciation and the robust GDP also indicate more retail demand. Hence demand for the retail space has to grow. Of course, the demand for commercial real estate is dependent on the global economy, but then while the global market conditions are much improved today as against the last two years, India stands out as the best investment opportunity for them as well.”
Harinder Dhillon, VP, Marketing of Raheja Developers echoes the sentiments of the sector. “2011 will continue to see the real estate industry in a very strong position. Demand will be upbeat across residential, retail as well as commercial sectors in major metropolitan centers across the country. The year 2011 has a very positive outlook for the real estate industry since the demand-supply gap in housing in India is huge. There is a tremendous shortage of housing in this country & till such time the gap is not narrowed down, there is only one way the prices are going to go & that is up. There might be a very minor price correction in certain over-heated sections of metropolitan centers towards second half of 2011 but by and large, it is a very bullish outlook for 2011” he said.
Om Chaudhry, CEO of FIRE Capital Fund, however, has a word of caution here. He believes that while there is a huge hunger line for the realty, FIIs inflow can be a matter of concern since China is going to control the GDP. “The speculative elements have added to the demand-supply mismatch in the Indian market. Crisis of credibility is going to be the biggest challenge for the developers, since many of them were reeling under the debt and balance sheet problems in the last couple of years either forced them to delay the projects or completely abandon it” he adds.
