By: Ravi Sinha
Track2Realty Exclusive: It has indeed been a busy year and 2014 can well be described as the year of roller coaster emotions where the business confidence index was exposed to two extreme ends of swing. In an otherwise flat year, the real estate sector may not have been witness to transactions on ground but the poetic engagement has definitely been at the emotional level.
The year saw the emotions changing from bearish to bullish and then by the end of the year the sector settled with a ‘whatever’ kind of gesture, articulated by few as cautious optimism. Starting the year with extremely bearish sentiments the built environment of Indian real estate was praying for Narendra Modi-led BJP Government to come to power.
What better could the wishes have been answered than exceeding the expectations the BJP came to power with absolute majority, thus ensuring stability. With no compulsions of coalition politics anymore and the face of Modi being industry friendly the sector got into euphoric overtones.
As a matter of fact, the business confidence index of Indian real estate has never been as high ever since the slowdown loomed over the sector in 2008. For a couple of months post the General Elections it seemed the tide had suddenly turned and the sector has been exhibiting very high business confidence index. Sadly for the developers, the overtones failed to translate into market transactions or funding solutions and the ground realities remained unchanged for the sector.
The positive sentiment can be gauged by the fact that global real estate funds focused on India are seeking to raise $6 billion in new capital, on top of $1.6 billion raised in the first seven months of 2014; most of this is aimed at residential projects. As per the Emerging Trends in Real Estate Asia Pacific 2015 report published jointly by the Urban Land Institute (ULI) and PricewaterhouseCoopers (PwC) there has been a significant rise in interest from large sovereign and foreign institutional players over the course of 2014.
A CBRE report says that institutional investments and capital market transactions in the India realty market during the first nine months of the year stood at approximately US$ 4.5 billion. Out of this, land and development stage transactions attracted the highest quantum of investments (nearly 60%) from domestic as well as foreign entities during the period, indicating perhaps a significant amount of investment in Greenfield and Brownfield development. The commercial office segment, meanwhile, attracted more than 20% of this total investment amount during the period in question.
Commercial office spaces have been the biggest beneficiary of the year 2014. A Cushman & Wakefield report says net office uptake in the first three quarters (Jan – Sept) of 2014 has seen a significant rise of 36 per cent as compared to same time last year. Total net absorption of office space has been recorded at approximately 24 million square feet (msf) between January – September in 2014 as against the 17.7 msf in same time in 2013.
Housing market, however, remained under lot of stress across the major property markets of India. The track record of Delhi-NCR has been the worst with the Delhi-NCR having a total of 303.48 million sq ft (about 303,000 apartments) of unsold real estate, according to property research firm Liases Foras.
At the current pace of sales, this stock requires another 53 months to be completely sold off. In comparison, for the Mumbai region, the figure is about 48 months while it is the lowest for Bangalore at 19 months. For the top eight cities combined, the 765 m sq ft of unsold space will require at least 35 months to be sold.
Amit Oberoi, National Director of Colliers International maintains that from a purely real estate perspective and real estate indicators perspective it has been a disappointing year. “If I look at the housing new launches, these have been half of the year 2012; if I look at it from commercial spaces it has been low; if I look at it from sentiments and intentions and change of government I am extremely hopeful that there will be some positive changes ahead. So, it is all a mix where on the ground it has been very disappointing but hopeful with the intentions of the government. So, I hope there will be very soon specifics coming out with all the policy announcements that have been made,” says Oberoi.
Arvind Nandan, Executive Director of Housing.com finds a reason why the expectations have not been met. According to him, it was evident from 2013 itself that 2014 would not be a very bumper year. It was expected that there will be regime change at the Central Government which has happened. And then it was expected that the work on the very basic things would begin which would mean that the year will be a transition year which will see hand-over and change-over.
“It was very much expected that there will not be a sudden boom kind of change; so the things have gone as per the expectations. So, the year has been very much subdued but the seeds are looking like getting sown. So, I am slightly more positive. Of course, things have not changed and the results are not to be seen. So, conclusions are not there yet,” says Nandan.
A lot has been changing otherwise on the global economic front and the revival of global economy along with the sharp decrease in crude oil price meant the Modi Government was no longer reeling under the kind of financial balancing that the previous Manmohan Singh Government was left with. In the meantime, the developers have been displaying unprecedented patience with the government and, to be fair, the government too seemed to display a progressive outlook with a number of measures like activating REIT and simplifying FDI. Some of these measures, no doubt, have the potential to go a long way for the revival of the fortunes of the sector. Even the vision statements like roadmap for smart cities, infrastructure and others are also steps in the right direction.
Nikhil Hawelia, Managing Director of Hawelia Group believes that apart from the change at the policy level, what matters the most is the consumer engagement. They don’t seem to have that confidence in the market. He thinks while the business segment has understood the kind of policy roadmap that the Modi Government has and what will be the long term impact of these policies, the buyer sentiment is subdued more with the micro level uncertainties.
“From purely home buyers’ standpoint nothing has changed on the ground. The concerns are pretty much there, whether it is with job security, interest rate or inflation. And the subdued buyer sentiments have a direct bearing on the fortunes of the real estate sector. Hopefully, post budget the second quarter of 2015 will see the beginning of the revival of housing real estate market in general and the housing market in particular,” says Hawelia.
However, most of the policy announcements and roadmap of Modi Government on infrastructure and real estate are more of vision statements than actual work on the ground. The sector may have been impressed with the Modinomics even when with a carrot at the end of the tunnel, the independent analysts are looking forward to see the specifics and guidelines that would set the tone for actual work on the ground. On the eve of the year 2015 all eyes are set on those specifics and guidelines which could convert the vision statements into action.
