India’s property market takes a shine to growth

India’s real estate market has finally got its shine back.

Property values are once again inching up in key cities as investors make a return to their buying ways. (Even celebrities are putting up their monies to good real estate use — actor Ranbir Kapoor has just bought an apartment in Mumbai’s posh Pali Hill locality for a market-beating Rs350 million.)

Developers who were struggling with unsold inventory are suddenly finding takers. To keep the machinery of transactions rolling, lending rates are still very much on the generous side. Unless, of course, the buyer prefers to do the deal in cash.

“Developers, by being conservative in new launches in the last financial year (ending March 31, 2016), reduced unsold inventory down by about 37 per cent,” said Reeza Karimpanal, Vice-President — Residential Sales & Marketing at Embassy Property Developments, which is launching a high-end community-themed project next week in Bengaluru. “Sales velocity is about 11 per cent.

“But the acquisition costs of land remain high, (while) the cost of proposed high specifications also add to cost of project.”

But for the time being, at least, India’s real estate is intent on the bigger picture and not overly concerned about costs. That domestic buyers are making a return has shored up developers’ top-line numbers and eased the debt burden carried by the sector.

Most importantly, the government finally managed to pass the real estate regulatory bill in March, which ensures developers can no longer use up investor funds according to their whims. Under the new regulatory regime, developers will have to adequately compensate their buyers.

The mood, in a nutshell, is upbeat. “We are now looking at the bottom of the barrel as far as the prices going down are concerned,” said a spokesperson for Tata Housing. “We believe this is the right time for both consumers and investors to go ahead and buy their dream homes as (interest) rates will start moving northwards with the economy predicted to grow at 7.5 per cent in 2016-17.”

“The low levels of absorption have resulted in market favouring buyers with every developer offering the best possible deals. Growth is also propelled by NRI segment and investors capitalising on the appetite in the market for the large number of property options.”

Over the last two years, developers with luxury projects have had the UAE as the first port-of-call to tempt the wealthy expat to invest in another property. Even with domestic buying in revival mode, they will still be continuing their trips to the UAE, with many participating in the Indian Property Show opening Thursday (June 2) at the Dubai International Exhibition Centre.

“These launches are aimed at the diaspora as well as businessmen, high net worth individuals and celebrities looking at lifestyle living or even investments in luxury projects,” said Rohan Sharma, Associate Director — Research and Real Estate Intelligence Service at JLL India, the consultancy.

“While Mumbai luxury projects are typically limited to the south, south central and north, these ticket sizes are typically upwards of Rs60 million. Sales are limited on account of the ticket-size.

“In Delhi, such projects are being seen in Gurgaon and Noida, where land availability is enough to do large-scale developments. At a pan-India level, cities like Bengaluru, Pune, Chennai and Hyderabad also have certain locations where such upscale developments are already underway.

“Prices are a variable of city-specific land prices and availability and hence may vary … but the specifications for luxury remain similar across all.

“Such projects will have limited takers on account of the large ticket sizes and hence the scale of such projects could be different. Golf communities are still developing and land availability in larger metros will typically result in such developments coming up in satellite areas or outskirts of the city.”

A real estate law that packs a punch

It was in March that the central government passed the real estate regulatory bill. Now, the individual states will have to give their own stamp of approval for the law to come into effect.

Among other things, it requires projects to receive “statutory clearances” from the authorities before developers can get on with the works. The funds from sales — up to 70 per cent — need to be placed in escrow and there will also be higher penalties for project delays. And units will have to be sold on a “carpet area” basis and not on “super built-up”, another factor that will ensure a fair deal.

“The RERA Bill It provides additional comfort to home buyers and regulates the operation and functioning of this business, thus making it more transparent,” said Swaroop Anish: Executive Director — Business Development, Prestige Group. “It will weed out unscrupulous operators and ensure a more pleasant home-buying experience. The benefits of the new enactment will be felt in the years to come as the respective states adopt the Bill.”

The action is happening down south

India’s southern cities are priming for an upturn. Apple Inc.’s announcement of a tech centre in Hyderabad will be a ballast for the city’s realty, while Chennai’s residential space saw a 2.2 per cent gain in 2015 and is in line for a further 2 per cent increase this year based on JLL India estimates. “Many sceptics were expecting prices to be in the negative range at the end of the year,” the JLL report states. “However, the office market witnessed a spike in demand by about 33 per cent and this had a direct correlation with the residential prices which also witnessed a marginal growth.”

As for Bengaluru, “North Bengaluru has benefited from the dynamics of location as well as connectivity,” said Reeza Karimpanal at Embassy Property Developments. “Upgradation of the highway as well as seamless travel through the Outer Ring Road (ORR) link facilitates seamless travel within the city as well as access to the Peripheral Business District. The proposed Phase 2 of Metro rail will improve the connectivity of this micro-market with the CBD and South Bengaluru significantly.”




Source: Manoj Nair, Associate Editor, GN


For Rent


View more properties

For Sale


View more properties