Mr. Om
Ahuja, Jones Lang LaSalle India
Market Pundits
Continue to Predict that it will catch up across the board very soon.
In the closed circles
of large investors, we hear that that the rally of real estate as an asset
started in 2003 when country’s GDP growth was hovering at 8 % & inflation
was at 5 %. We also hear that in 2013, the trend reversed as India's GDP growth
hovered at about 5 % and inflation reached 10 %.
In such scenarios,
informed investors believe that the price growth of physical assets such as
commodities & real estate slows down. With high inflation eating into the
savings of the common man, available budgets do not encourage the taking of
long-term investment calls. The middle income segment perceives that limited
finances prohibit exposure to assets like gold and real estate.
Oversupply: Fact And
Fiction...
Over the last few
months, many research & media reports have spoken of excessive real estate
supply & slowing demand across many Indian cities.
In such an
environment, developers roll out discounts & extras that are not part of
the normal offers. Despite sporadic incidence of such offers in some cities and
locations, this trend is by no means a common one; it is limited to developers
who are struggling to attract demand.
However, market
pundits continue to predict that it will catch up across the board very soon.
This has created an
expectation that first few months of 2014 will see a correction in property
prices from developers across markets and projects. The obvious question that
comes to the mind of hesitant property buyers is whether they should hold their
purchase decisions in abeyance in order to benefit from a price correction, or
make the best out of the current offers and discounts.
Economy: Here Comes
The Sun..
With the rupee
weakening, exports-led sectors in India will do exceedingly well in 2014. The
global economy is looking up once again, and export-centric sectors like
Information Technology, automobiles, textiles, garments, diamonds and jewellery
will be the early beneficiaries of this trend.
Large corporate
listed players such as TCS, Infosys, Wipro and many other reputed IT companies
are hiring more employees and planning to pay better salaries in the next
increment cycle. This will lead to improved sentiments - and the stock market
is already reflecting this mood.
More pertinent to
real estate is the fact that once the positive sentiment gathers forward
momentum, fence-sitters will rush to buy apartments. This will be a key trend
to watch, especially in cities that are directly catering to these sectors -
specifically Chennai, Bangalore, Hyderabad, Pune &Gurgaon.
Evidently, looking at
the macro picture is becoming crucial when it comes to property investments.
With exports-led sectors set to flourish in the improving economic climate,
further fuelled by the agriculture sector's revival on the heels of an
excellent monsoon in 2013, a pick-up in GDP growth by the 3rd quarter of 2014
is definitely on the table.
The multiple measures
by the Central and State governments as well as the RBI to contain inflation
will further improve market sentiments.
So far, so good. But
what about the real estate supply overhang that has been so generously hyped by
the media?
Infrastructure: Not Oversupply - Is Key..
Most cities have
pockets with excessive supply, as well as pockets wherein supply is severely constrained.
Despite concern about economic growth and high inflation, areas with excessive
supply will continue to see demand, and therefore price appreciation. As long
as an area is seeing infrastructure development, it remains a safe investment
bet.
However, areas which
are not immediately in line for infrastructure enhancement - such as the far
suburbs of Mumbai and many areas in Delhi NCR - are definitely avoidable.
Budget-conscious
house buyers gravitate towards areas which offer relatively lower real estate
prices, but they will understandably not compromise on minimum livability and
connectivity standards.
One last question
remains unanswered - that of the elusive price correction versus the real,
on-ground discounts and offers currently available.
Considering that
sentiments are all set to improve on the back of increased corporate earnings
and a revitalized capital market, the current sluggishness in property sales
can continue for a maximum of two more quarters.
This interim period
is crucial for property buyers and investors, as the currently available deals
and offers will continue for this period. The basis for this prediction is not
conjecture, but the visible presence of economic factors that drive growth in the
real estate sector. From this point onward, the clock is ticking and the
countdown has begun.
About the author..
Mr. Om Ahuja is CEO
(Residential Services) at Jones Lang LaSalle India
Fro Media Contact..
Mr. Arun Chitnis
Head – Corporate
Communications & Media Relations
Jones Lang LaSalle
India
Level 6, Amar Avinash
Corporate Plaza
Bund Garden Road,
Pune - 411001.
Tel: (020) 30930441
Fax: (020) 40196101
Mobile: +91
9657129999
Website:
www.joneslanglasalle.co.in
Blog:
www.joneslanglasalleblog.com/realestatecompass
Twitter:
@JLLIndia_Realty
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