Mr. Ashwinder Raj Singh, JLL India
All indicators are towards a convincing revival by the
end of the year
India’s residential property market
has been going through turbulent times for past few years. However, things are
looking up now with changes in the economy and various initiatives announced by
the Government.
To understand how various market forces have been making an
impact, it is essential to look at the overall economic scenario in the
country.
 |
| Mr. Ashwinder Raj Singh, JLL India |
Economic Performance:
·
FY 2015-16
saw Indian economy become the fastest-growing in the world with a GDP growth of
7.6%. This, despite adverse global economic circumstances that put a lot of
pressure on earnings, exports and overall development.
·
The
Government was able to contain the fiscal deficit to the budgetary target of
3.9%, and is working on lowering it further to 3.5% in FY 2016-17
·
RBI has cut
the key interest rates by 1.5% since January 2015, and the Repo rate has come
down to 6.5%. This has started showing a visible positive impact on the
economy. Industrial growth crawled back into the positive zone at 2.1% in March
’16, crude oil prices stabilised at a favourable price band for India, CPI
inflation decreased further at 4.83%, and there are more-than-optimistic
expectations for a good monsoon this year.
Factoring all this in, the Indian
economy looks well poised to grow at a healthy rate of 7.7-7.8%. Though lower
than expectations, inherent weaknesses in the system and inadequate
infrastructure development continue to impede faster growth.
·
FY 2015-16
saw traction in urban demand, and the current financial year is expected to
usher in growth in the rural economy on the back of favourable monsoons.
Agriculture contributes 15% to the country’s GDP; and with 2016 being declared
a ‘La Niña’ year, further growth is more or less assured.
The impact of La Nina
phenomenon on our economy is noteworthy. The average growth in GDP/Private
Consumption/Investment on a year-on-year basis is 8.9%/7.4%/10.4% during a La
Niña year, compared to average growth of 5.8%/5.2%/7.2% on a y-o-y basis in a
non-La Niña year
·
The signs of
economic revival, along with foreign investment coming in the country, are
evident in the share market offering 14% returns over a 15-year period ending
in March’16. FDI increased in the country by a whopping 37% during FY 2015-16,
going up to $39.2 billion from $28.78 billion in the previous FY.
Judging by how the economy is
moving, there is definitely a rationale for positivity in terms of business
performance. Let us take a closer look at how the residential real estate
sector has been performing, and what lies ahead:
Real Estate Performance So Far:
·
The real
estate sector saw the worst phase in 2015-16 with sales and prices plummeting.
High inventory levels, diminished demand and limited liquidity impacted new
launches, as well. As per statistics, new residential project launches reduced
by 6% in Q1CY16 over Q4CY15. For FY 2015-16, the number of new launches stood
at 1,81,294 units compared to 2,16,082 units in FY 2014-15, equalling a drop of
16%
·
Overall
residential sales were down in the FY 2015-16 compared to FY 2014-15. As per
recent data, 1,58,211 units were sold in FY 2015-16 vs. 1,61,875 units sold in
FY 2014-15, which is a drop of 2.2%. However, a positive twist to this
otherwise grim situation is the rise in sales in Q1CY2016. This quarter saw a
sale of 42,521 units compared to 39,001 units sold in Q4CY2015 - an increase of
9%.
The Road Ahead:
Trends are beginning to change basis
expectations of a good monsoon, revival in the economy, reducing inflation and the
fact that residential prices have bottomed out. Also, the improving regulatory
environment in the real estate sector, coupled with progressive Government
schemes like Smart Cities, AMRUT and ‘Housing for All by 2022’, are beginning
to have a positive influence. Additionally factoring in banks’ passing on of
interest rate cut benefits to the ultimate consumers, the residential sector is
all set for rebooted growth.
Where prices are concerned, there
was stagnation or at best a modest rise by the end of FY2015-16. While Lucknow
saw an increase of 16.1% in the prices in Q3FY2015, NCR saw a price correction
of 5% during April-June, 2015. Going forward, prices are expected to rise
modestly.
The setting up of the Real Estate
Regulatory Authority to ensure time-bound delivery of projects and more
efficient and transparent dealings with developers point towards consumers
gaining trust and coming back to investing in the market. A convincing start has
been evidenced by the affordable housing segment, with this category witnessing
increased traction on the peripheries of the major cities. Of the total sales,
60% of the properties were priced below Rs. 5000/sq.ft. in FY 2015-16.
Global factors do have an impact,
but India’s currently low inflation rate coupled with low interest rates and a
surging economy will doubtlessly induce faster grow in the residential real
estate sector in the mid-to-long term. Various additional factors point towards
a more positive sentiment, including the stimulus that the recent Union Budget
provided to both the supply and demand sides, improved funding for the industry
and the clearing of roadblocks on REITs. The most convincing signs of revival
should be visible in the last quarter of 2016 or by the first quarter of 2017.
Mr. Ashwinder Raj Singh is CEO - Residential Services at JLL India
For media contact
Arun
Chitnis
Head
– Corporate Communications & Media Relations
JLL
India
Pune
411001.
Tel:
(020) 30930441 Fax: (020) 40196101
Mob:
+91 9657129999
Twitter: @JLLIndia
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