THE ECONOMY HAS REASONS TO CHEER
The government presented a forward looking and progressive Union Budget in July, which managed to touch upon all topical issues of reviving economic growth, attracting investments, churning industrial production, promoting urban development and creating infrastructure.
The budget struck a fine balance between fiscal prudence and populism, and managed to project the government’s thought process on contentious issues such as retrospective taxation and fuel/food subsidies. The real impact on the economy, however,will be upon investing all the funds allocated in the budget through project implementations.
Meanwhile, t he Central Bank’s move of keeping base rates unchanged in its latest policy review was widely expected as consumer price inflation remained a concern, and the impact of the budget was yet to be felt across sectors.
Any reduction in base rates in the coming months will be a positive indicator for the sector, spurring housing demand and construction activity across the country.
Yet another positive policy initiative saw the government clearing upto 100% FDI in railway infrastructure segments such as electrification, signaling, high speed and suburban corridors; while permitting upto 49% in infrastructure and defense.
One of the most important announcements for the real estate sector was the Securities and Exchange Board of India’s ( SEBI’s) i ssuing t he f i nal guidelines for Infrastructure Investment Trusts and Real Estate I nvestment T r usts (REITs) in India. This signalled a positive move for India’s capital markets as a whole, and its realty sector in particular.
Housing market update
During t he month of July, housing sales remained muted and new supply saw a decline across leading cities. A large majority of new projects were launched in the mid-segment, concentrated in micro-markets such as the Old Mahabalipuram Road/Grand Southern Trunk Road, Ambattur and Porur in Chennai; Marathahalli ORR, Old Madras Road, Whitefield, Hebbal, Thanisandra Main Road and Gottigere in Bangalore. In contrast, residential real Any reduction in base rates in the coming months will be a positive indication for the real estate sector, spurring housing demand and construction activity across the country The government clearing upto 100% FDI in railway infrastructure segments is a positive policy initiative. High streets across India’s leading cities witnessed healthy demand for retail estate activity remained subdued in Delhi NCR, Mumbai, Hyderabad and Kolkata during July. Meanwhile, Pune is likely to attract significant supply addition as part of the proposed township developments by prominent developers in the peripheral locations of the city.
Housing prices remained l argely stable during July. Owing to subdued demand levels, premium residential locations – such as Chanakyapuri in Delhi and Golf Course Road in Gurgaon – saw a slight price correction. Conversely, strong demand coupled with limited availability led to a price appreciation in central Chennai.
Office space update
Commercial leasing activity picked up in July, with leased space appreciating by about 10% over the previous month. Although most of the demand was for small to medium sized office spaces, a few big ticket transactions were observed in Bangalore – primarily in IT/ ITeS, manufacturing, automo- space. Global retailers such as Michael Kors and Giant forayed into Bangalore while Spa Ceylon launched its first India outlet in Mumbai The Department of Industrial Policy and Promotion is likely to scrape the 30% domestic sourcing clause for FDI in single brand retail which in turn will encourage foreign investment inflows tive and telecommunication segments.
Bangalore also remained the largest contributor to office space demand among the leading cities, followed by Pune and Chennai, representing about 84% of the total space transacted during this month.
Occupier interest remained strong in micro-markets such as the Outer Ring Road (ORR) and Whitefield in Bangalore; IT Corridor in Hyderabad; Kharadi and Baner in Pune; and Guindy and Mount Poonnamalle Road in Chennai, with demand mostly driven by IT/ ITeS fir ms for their expansion and consolidation needs.
SEZ developments in Gurgaon, Bangalore and Chennai also witnessed healthy take-up during the month. Going forward, a f ew l arge sized transactions are expected to reach completion in prominent tech parks along the ORR in Bangalore.