By: Diipesh Bhagtani, Executive Director, Jaycee Homes
Track2Realty Exclusive: Indian real estate sector, especially the residential property segment, has been undergoing a tough period since the start of 2012. A host of challenges such as expensiveness of liquidity for real estate, lack of availability of serviced urban land, continuing procedural delays in approvals, slow pace of infrastructural growth and the fact that the country still has relatively low transparency in real estate terms, has affected the sector.
The Indian residential property market has sung from one spectrum to another in 2012. Developers hope the now onwards there will be more positivity to the sector.
In terms of residential real estate, the metropolitan cities such as Mumbai and NCR have emerged as chartbusters. In these cities, residential rates have already crossed and surpassed the peak levels.
However, the inherent demand for residential properties in these cities is very high and supply is constrained. There have been many launches of late, and developers’ input costs have gone up, reducing profit margins.
The residential prices in Mumbai and NCR are not likely to fall ahead. On a more general note, there is a possibility in residential corrections in tier II and tier III cities, depending on the level of stress project developers are under at a company level, rather than at a project level.
When it comes to projects, there is a likelihood of price rationalisations in large townships in the extended suburbs, because absorption of residential spaces takes much longer in such projects.
Timely completion of projects would be a major issue in the year ahead as this has been one of the fundamental reasons of liquidity crunch in the sector.
Moreover, residential market will see less of demand-supply mismatch with the new launches in 2013 and while metro cities will command high end projects, affordable housing will gain momentum in the satellite towns and periphery locations. Dynamics of tier-II and III cities will be dependent on the overall economic activity in the given micro market.
Demand for residential real estate is indirectly related to the global economic fluctuations. Residential property market derives from consumer demand, which again is covered by domestic factors such as high inflation and policy changes.
If home buyers’ salaries are not revised upwards or remain stagnant, there will be a reduction in consumption power, which will have an impact on the residential real estate market in India.
