Track2Realty Exclusive: Most of the real estate analysts believe the year 2012 has been pretty disappointing and actually a waste. Anshuman Magazine, CMD of CB Richard Ellis (South Asia), however, feels it was better than expected. He asserts when the global economy is down and the Indian GDP continuously nose diving, any movement is a positive indicator. In an Exclusive Interview with Track2Realty Magazine talks about the learning of the year and sounds cautious with the prospects of the year ahead.
Track2Realty: Do you feel the year 2012 has been quite disappointing for the sector?
Anshuman Magazine: In fact, on the contrary, it has been better than expected in my opinion. Yes, the movement has been pretty slow, but at least there has been some movement which many of us were apprehensive at the beginning of the year. 2012 had started as a very tough year for the sector and there were more challenges compared to the previous year. So, it could have been even worse.
Track2Realty: You mean to say no major disappointment in the year?
Anshuman Magazine: Of course, there has been disappointment but what I am saying is that it could have been even worse. And it was expected to be even worse. If we go by the numbers it was much lesser than last year in all the asset class. So, it was a slow market but at least moving market. In residential there were significantly less new launches, though movement in the secondary market was more or less reasonable. In office space also, it was close to 30 million square feet of leasing which was less than the last year.
Track2Realty: How is 2013 expected to shape up for the sector?
Anshuman Magazine: Early part of the year 2013 is expected to be the same. At least, I don’t see any chance of bounce back in the market due to global economic uncertainties. Even the projected GDP growth of India which was earlier around 8.5 per cent has now come down to 5.5-6 per cent. Due to this there has been a slowdown in the overall economy and it will affect the real estate sentiments as well. Then you will have elections ahead and all that has a chain effect on the prospects of the market.
Track2Realty: But don’t you think 2013 promises to change the sector post regulator bill and land acquisition bill?
Anshuman Magazine: These bills are not going to make any major difference as far as revival of the market is concerned. How these new laws are framed is also very critical since if you talk about the land acquisition bill, which in its present form is going to make the acquisition more difficult. And that is not good for the industry and overall infrastructure. With regard to the regulator, I would say it is good in the long term only if it balanced and aimed at regulating all the stake holders, including the buyers. But all these bills have a long term impact, and are not going to have any immediate impact at least in the year ahead.
Track2Realty: Investment is going to be a major challenge and foreign funds are too cautious in a market which is labelled as not up to global standards?
Anshuman Magazine: Funds I believe will continue to trickle but I don’t see the kind of money really coming which can actually revive the market. We are far away from the ground realities of 2006-07 when there was conducive investment climate. Due to global financial conditions, the FDI and other foreign funds are expected to stay away. Some of them may re-invest in the Indian realty, but by and large it won’t be a windfall for the sector. So, going forward, either the government will have to rethink its focus on the realty sector, or banks will have to restructure since interest rates are way too high of global standards. Having said that, lets us be clear that unless the private investment comes into the sector, the existing funding gap will continue.
Track2Realty: What has been the biggest learning of the year 2012?
Anshuman Magazine: Learning depends on which segment you are talking about. Overall from a developers’ perspective, fiscal discipline is the biggest learning where they need to balance debt-equity ratio. Whichever companies have maintained this fiscal discipline are today doing well. Quality and delivery is equally important and even in this slow market companies which have delivered the promised apartments on time have not suffered much. We have been seeing that standing on the index consumer confidence is what ultimately matters.
Track2Realty: Do you see any chance of revival of the market in 2013?
Anshuman Magazine: Revival is too strong a word in the market where any movement is worth noticing keeping in mind the global financial conditions and our own less than projected GDP growth.
Track2Realty: Any particular asset class do you feel would be catalytic to bring normalcy back to the sector?
Anshuman Magazine: We all now bet on the FDI in retail that can add to the existing pace of demand in the retail segment. However, I must add here that residential segment is very important for the real estate market and no major strong indication is coming from that quarter. But yes, looking at the industry and logistics activity, I feel they have the potential to take the sector to the next level. However, a lot depends on the global market for that also.
Track2Realty: Which are the emerging markets in the year ahead?
Anshuman Magazine: I don’t see any significant change in the demand side of market and major markets like Delhi-NCR, Mumbai, Bangalore and Chennai will continue to dominate the property market. A lot of activity is nevertheless expected in emerging markets like Ahemdabad and action is expected in some of the smaller markets like Coimbatore as well.
Track2Realty: 2012 saw very many emerging trends–like partnership model back in business, restructuring of the overleveraged companies, micro market focus, execution and not land bank. What are the emerging trends for the year 2013?
Anshuman Magazine: I feel the developers have already started realising that they need to get out of their non-core business. They would instead focus on completing the projects that will streamline their cash flows and reputation. Delivery will be the key in the year ahead and they will have to cut debt, rope in more partners and smart players will focus on their tried and tested micro markets instead of going pan-India. Of course, some large developers with presence in very many cities can afford that luxury, but by and large developers will focus on their existing markets.
