COLUMN/SHISHIR BAIJAL, CMD, KNIGHT FRANK (INDIA)
The real estate sector has seen a rise in postive sentiment this year. Will the fervour continue this festive season?
The real estate sector has seen a rise in postive sentiment this year. Will the fervour continue this festive season?
The last three months of the calendar year, dotted with festivals across different faiths, is one of the most auspicious periods in the entire year. This is also the time when most Indian households make big ticket purchases. Real estate is the costliest asset that households buy and, in most cases, the festive season is an opportune time. The enthusiasm of prospective home buyers gets a further boost during this festive season through numerous offers that developers dole out, as do banks and home finance companies.
So how different will the upcoming festive season be? Will home buyers make a comeback, in markets like Delhi-NCR?
THE BACKGROUND
To get an idea of what to expect in the upcoming festive season, it will be worthwhile to look at what has happened in the sector in the past six months. The most striking feature of the sector, in the first part of 2016, was positive sentiments making their way back into the sector. Sales picked up and also turned positive with Mumbai and Bengaluru markets leading the way. The only exceptions to this trend were Delhi-NCR and Chennai. Even at a pan-India level, sales were 7 per cent higher in the first half of 2016, compared to the same period in 2015. New project launches are yet to witness this new-found vigour, but there are some positives. Mumbai has been the biggest turnaround story – new project launches witnessed a 29 per cent jump in the first half of 2016, compared to the same period in 2015. Similarly, new launches went up by 13 per cent in Bengaluru and by 4 per cent in Hyderabad. It is worth noting that this turnaround has come on the back of most markets being in the red in the first half of 2015. At a pan-India level, the rate of decline in new launches across major markets slowed down in the first half of 2016, compared to the same period in 2015. This renewed confidence in new launches and absorption will augur well for the sector.
THE ENABLERS
These positive sentiments got a further boost due to policy initiatives, that the sector had been waiting for long, by the government. The Real Estate Regulation & Development Act 2016, which will come into full force in May 2017, will have a direct and positive impact on the relationship between home buyers and developers. This Act empowers the consumer and brings added responsibilities on the part of the developer, mandates submitting broad based information about the project, construction plan, land-related clearances and acquiring the required approvals from local bodies – making the process of buying a house hassle-free. The recently passed GST Bill will inject new life in the seemingly inert market.
THE OUTLOOK
The recent FICCI-Knight Frank Real Estate Sentiment Index indicates a considerable improvement in sentiments in the sector, overall. However, capital values are expected to remain largely muted for the remaining part of 2016. Developers who, till the very recent past, have had to grapple with cash flow issues, largely because of muted sales, will find it a bit difficult to lower prices during this festive season. The cautious mode adopted by consumers will also not encourage developers to increase prices. However, it is expected that there will be offers that will try to tempt home buyers to take the first steps towards buying a house. On the whole, developers will try to increase volumes, in sales and new launches, and festive offers will have to play a key role in pursuing these endeavours.
Developers who, till the very recent past, have had to grapple with cash flow issues, largely because of muted sales, will find it a bit difficult to lower prices during this festive season