Track2Realty Exclusive: The financial capital of India, Mumbai has always been reflective of the business confidence of the country. It is a market that shows the way forward for the investors in general and India Inc in particular, be it on the Sensex or the real estate market. It is hence assumed that if the confidence index in the city is low, it will have a percolating effect on the rest of the markets across the country.
The subdued sentiment in the Mumbai real estate in the last over a year and its affect on almost all the major markets in India is a case in point. And hence, it is important to assess the business confidence index of the Mumbai real estate to forecast the market ahead not only in the city of Mumbai but across India.
Real estate is by and large a business that is sentiment driven is something which is not just a statement but a fact that is deep rooted in the very psychology of both the developers as well as the buyers. It is hence all the more necessary to understand the business confidence index in order to understand and forecast the future course of the realty business.
The market in the city of Mumbai has been subdued for quite some time and everyone waited for long to get a trigger point that could revive the fortunes. The trigger point may not have been substantial by any stretch of imagination, but in the western part of India the confidence nevertheless is increasingly moving northwards.
It seems in a slow moving economy the change of government at the Centre has done a world of good for the real estate in general and Mumbai-based developers in particular. The developers are hence euphoric with the BJP’s Government at the Centre in anticipation of their fortunes to revive, if not turnaround overnight. What is apparent across the Mumbai Metropolitan Region is that instead of a cost and benefit analysis of the policies of the new government to come, the business captains want to make the best of the sentiments.
Even the developers with stalled projects have started negotiating to resume the construction, while others are planning many more projects to launch. Investors too seem to be smiling to them as nearly all believe that the real estate is poised to move to the fast forward track of development. Analysts tracking the property market in Mumbai are hence trying to find a method in the madness. What is making the Mumbai property market so bullish after the General Election results?
The analysts are also quite conscious of the fact that the business confidence index of the city and its realty market has suddenly gone up pretty high, even though any tangible difference is yet to be seen in the functioning of the authorities in terms of approvals and clearances. Not only that, the policies of the new government have not been rolled out as well that could indicate a positive shift in favour of the business. Rather some pre-poll jitters are still affecting the functioning as the State too is all set to go to the polls.
Niranjan Hiranandani, Managing Director of Hiranandani Group candidly says that the business confidence index of Indian corporate sector in general and Mumbai real estate in particular is pretty high and the rise of Sensex is a testimony to the fact. Expecting the FDI prospects to improve soon, he says that real estate business has a lot to do with the sentiments and the ball is in the court of the government. If India has to meet the housing shortage of 25 million plus in the next 10 years then one has to do away with the archaic laws like environmental clearance etc.
“In Mumbai there is more reason to believe that turnaround is on the cards since the State too is going to polls soon. Till now the investors were shying away due to FDI deterrence and various road blocks like high interest rate, service tax, VAT, stamp duty etc. I don’t think that investors are shying away because the prices are all time high; they would rather be coming back to market at this price point now since the business confidence index is high. I feel Real Estate Investment Trust (REIT) is going to be a game changer for the sector,” says Hiranandani.
Dibyendu Banerjea, CEO West Zone, Pashmina Developers admits that the way a large section of the Indians are celebrating the election verdict, real estate developers are also hoping for review of policies. Also, they are expecting positive changes in prices on the premium segment with the onset of a stabilised government. Though contriving the sector can take several steps, it would have a constructive impact in the medium to long term period. He, however, maintains that the optimism is subject to revised budget to be presented by the new government that will lay stress on infrastructure.
“It is completely non-conducive as there is no one window clearance system currently operational. There is often a ruptured pattern of work eventually leading to delays in the project progress. But with a new and stabilised government in place developers are anticipating better support from the system that will help streamline the entire process, making it a clutter free experience for the private players. The real estate segment is gaining momentum with the development and investment in luxury villas, branded homes, holiday/weekend retreats, second homes, and investments abroad amongst others. Hence, a positive outlook of the investors with respect to real estate market is expected, as stability in the market is anticipated/foreseen with a stable government,” says Banerjea.
Analysts believe that the market sentiments have definitely improved post the elections and that is bound to have a positive impact on the fortunes of the sector. They maintain that while the new government cannot engineer a quick turnaround of this sector, it can take several steps that would have a positive impact in the medium to long term. They rather insist that the index of buyers’ and the investors’ sentiments have definitely gone up.
However, the change in terms of actual percentage is yet to describe the exact mark. There has been an increase in the customer faith which can be seen by the rising investments in not only the real estate but the other investment instruments as well. The inquiry level with various developers in the city has suddenly seen a northwards curve and it is generally anticipated that it will further lead to improved sales figure for most of the developers.
At a micro level in the Mumbai property market, it is believed that now is the time for city administration to take certain pro-active measures that can take this business confidence index to the next level of growth.
Business confidence, after all, is all about a matter of sentiments which is more of intangible in nature. Only a healthy transaction rate of residential properties and higher occupancy level of the commercial properties can revive the real estate market in terms of tangible growth orientation. The growth has to be a sustainable growth and not speculation in the market, which has historically been a dampener for the sector in the long term.
Among the wish list is the formation of a nodal body for all clearances, a significant debt structuring mechanism by the financial institutions, a comprehensive redevelopment policy benefiting all stakeholders, clarity on the CRZ norms and faster environmental clearances.
