By: Ravi Sinha
Track2Realty Exclusive: While the Indian real estate has been on a copy & paste mode in the last three years where not much support has been extended by the market or the policy makers, there is a strong optimism within the built environment that 2014 would be a turnaround year. Though nothing much has changed in terms of issues & concerns of the sector as another year comes to the end, some of the policy decisions in the last six months indicate the sector is finally on the road to recovery.
To add to it, the last budget before the General Elections also promises to take cognisance of the fact that it is the real estate in general and housing in particular that can put the economy on the track. Collectively, all this make the sector believe that worst is behind and the year ahead is a year of revival.
Critics may question whether there is any reason why the sector should look forward to revival in 2014. After all, it will be an election year where all the approval processes may slow down, the Reserve bank of India (RBI) Governor hawkish on the sector to tame inflation and no clarity over the next government at the Centre forcing the economists to keep fingers crossed for reasons beyond real estate as well. However, the market fundamentals & political compulsions of the government do not support this pessimism any more.
Surprisingly, the sector has its own reasons to believe that the year ahead will pave the way for smooth ride. The sentiment by and large has been that the sector has weathered the crisis post global slowdown and it is time to leave the worst possible behind. There is a strong feeling in the sector, and many economists agree to it, that the government has no option but to heed to the legitimate needs of the sector if they have to revive the economy for face saving before the General Elections. So, the next Union Budget 2014-15 is eagerly been waited for the beginning of the revival of fortune within the sector.
Rahul Gaur, CMD of Brys Group asserts that the first half of the year may be confusing prior to the elections but post the elections the market sentiments in general will be stable, if not bullish. Of course, the prospects of an unstable government is something that everyone within the built environment, including the banks and financial institutions, is keeping the fingers crossed, yet he maintains that the investment fundamentals of the sector are so strong that once the confusion with the next government is over things will fall in place.
“The PE investment in Indian realty has already registered 26 per cent up in the first three quarters of 2013. The prospects of Real Estate Investment Trust (REIT) becoming a reality next year would open another funding option for the sector and also benefit the retail investors who can otherwise not afford to buy a property. If the REIT is allowed in the country without additional taxation issues defeating the purpose, it will also help the sector become more transparent and professional in its functioning. Moreover, post the elections I feel retail FDI will also start attracting sizeable investment,” says Gaur.
With the regulator coming in the sector, expected sometime in the 214 itself, it will give the Indian real estate a much-needed image makeover before the global investors who are apprehensive with the sector due to opaque functioning and lack of corporate governance. Similarly, the Land Acquisition Act aims to ensure fair market compensation to the land owners and put an end to the trust-deficit, protest and in some cases judicial intervention leading to stalling of the project.
Sachin Sandhir, Managing Director, RICS South Asia says what can be vouchsafed is that the year 2013 has been fruitful from policy and governance standpoint; the same can not be said from sales perspective. Having said this, in a slow moving economy where the RBI’s focus has been to tame the inflation and not encourage excess liquidity in the market, if the sales are still happening, it shows there exists a right market at the right price point.
“I feel the time has come when the government, irrespective of which government comes to power post elections, has no option but to give the housing sector its due. Real estate has the potential to revitalise the Indian economy and hence I am very optimistic that the turnaround will start happening with the next Union Budget itself,” says Sandhir.
More importantly, it seems the slowdown has taught the developers a sound lesson that they have to define the demand before any new launch. Right product in the right market at right price point is the mantra ahead. Even in 2013 the developers who have done this are selling the projects amidst overall slowdown. What can be a better testimony than the fact that the developers who did their research to define demand have actually been selling more luxury projects?
So, the experiment and learning in the Indian real estate post global economic slowdown has led the sector to the road of recovery. Since the realty market is by and large sentiment driven, it seems the change in sentiments after next budget and the General Elections will change the sales velocity of the market as well. Reforms oriented measures like REIT can further fuel the market with liquidity and hence 2014 is largely seen as the year when maturity of the realty market will be recognised by the investors, policy makers and end-users alike.
