Good news for the dis­cern­ing end-user

This is the right time for in­vestors look­ing at cost-ef­fec­tive projects to park their funds, as weak mar­ket sen­ti­ments are likely to open up op­por­tu­ni­ties for in­vest­ing in qual­ity projects

HT Estates - - HTESTATES - Rami Kaushal

There are still sig­nif­i­cant in­vest­ment op­por­tu­ni­ties left in In­dia’s real es­tate mar­ket. Hous­ing de­mand re­mained largely stag­nant across ma­jor ur­ban mar­kets in In­dia dur­ing the first half of 2013. End-user per­cep­tions of in­flated hous­ing prices, as well as high bor­row­ing costs kept off home buy­ers dur­ing this pe­riod. In fact, sub­dued de­mand lev­els even led to a price cor­rec­tion of around 10% to 15% across most mar­kets in In­dia. Re­cent pol­icy moves from the Cen­tral Bank — vis-àvis the rise in repo rate as well as the 20:80 schemes — are ex­pected to fur­ther dampen in­vestor sen­ti­ments. With home loans hav­ing gone up now, home­buy­ers are likely to re­main cau­tious and de­lay their pur­chase de­ci­sions fur­ther. How­ever, a sil­ver lin­ing seems to be the in­creas­ing in­ter­est of non-res­i­dent In­di­ans (NRIs) in pur­chas­ing prop­erty to lever­age the de­pre­ci­at­ing value of the ru­pee.

De­spite the pre­vail­ing de­mand slow­down, res­i­den­tial sup­ply in key mar­kets across the coun­try wit­nessed an in­crease in the first six months of 2013. As per CBRE’s lat­est re­port on the res­i­den­tial seg­ment, In­dia Res­i­den­tial Mar­ket View H1 2013, more than 65,000 units were launched across In­dia’s lead­ing cities in the first half of the year, as com­pared to about 48,000 units launched dur­ing the sec­ond half of 2012.

This de­mand/ sup­ply mis­match has con­trib­uted to an over­sup­ply sit­u­a­tion in most cities, lead­ing to mixed sen­ti­ments on as­set pric­ing across var­i­ous cities. About 88% of this sup­ply was con­cen­trated in the Delhi Na­tional Cap­i­tal Re­gion (NCR), Mum­bai and Ban­ga­lore mar­kets, in­di­cat­ing their promi­nence as res­i­den­tial real es­tate in­vest­ment des­ti­na­tions. Not sur­pris­ingly, most of th­ese new launches across In­dia’s top cities came up in pe­riph­eral/sub­ur­ban ar­eas, and in the mid-end price seg­ment, to cater to the ris­ing de­mand for af­ford­able hous­ing.

Of­fice space ab­sorp­tion in the top seven cities of the coun- try de­clined by ap­prox­i­mately 14% q-o-q, reg­is­ter­ing around six mil­lion sq ft as com­pared to around seven mil­lion sq ft in the pre­vi­ous quar­ter, ac­cord­ing to the find­ings of a re­cent re­port.

As far as hous­ing in­vest­ments go, home­buy­ers may con­sider the present pe­riod for in­vest­ing in good hous­ing prop­er­ties. This might be the right time to take ad­van­tage of the price weak­ness in NCR mar­kets, for in­stance.

It is an end-user mar­ket cur- rently; and price points in the pre­mium/ lux­ury as well as high- end/ mid- end seg­ments are ex­pected to re­main sta­ble in the short- to medium-term. Cor­po­rate oc­cu­piers look­ing at re­new­ing or re­struc­tur­ing leases in the short to medium term will con­tinue to hold strong lever­age in the of­fice leas­ing mar­ket.

The au­thor is head – con­sult­ing and val­u­a­tion, CBRE South Asia Pvt Ltd


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