India realty market update
This year while 6% of global retailers are targeting India for their office spaces, residential project launches are likely to increase in most of the leading cities
years. During this time, the cost of acquisition or even just holding the land for a project rises.
However, this is only one side of the picture. Many developers i ntentionally undertake a slower pace of construction if sales in their project are sluggish or a larger part of the project is unsold. They may have diverted a sizeable chunk of the revenue generated from pre-launch sales to another project, or utilised it to pay off a pressing bank debt.
Project quality and deviations
Recourse for consumer
The Real Estate Regulation and Development Bill that is long languishing on the policy drawing board (and still under consideration by the government) was formulated with the intention of protecting consumers better. However, after the most recent revisions to RERA, it seems that it will in fact now be less protective towards buyers. While the bill aimed at providing an alternate redressal mechanism, the new provisions are talking of no recourse to other consumer forums. Consumers should be aware that a certain degree of due diligence and awareness about their rights can protect them against unscrupulous practices by developers. In the first place, due attention should be given to details while drafting the sale agreement. Developer’s sales team will usually present a buyer with a readymade agreement format, and a buyer must ensure that this captures every relevant detail. If it does not, the buyer is fully entitled to ask for missing details to be included, and potential grey areas to be clarified. A copy of the final agreement must be retained, as this will serve as the primary evidence in a legal action filed for agreement violations.
The Government of India presented its Union Budget 2015-16 on February 28, 2015, highlighting that India’s economy was in a bright spot compared to the rest of the world. This was mainly attributed to reduced vulnerabilities concerning economic slowdown, persistent inflation, slackening domestic demand and currency fluctuations. The Budget estimated a GDP growth rate of 7.4% in 2014- 15 ( an increase over 6.9% in 2013-14). Banking upon macro-economic stability, greater fiscal prudence, high employment generation and indigenous manufacturing, growth is expected to touch 8.18.5% in 2015-16. This would make India a leading growth driver in the global economy. Overall, the Budget struck a fine balance between populist measures, procedural efficiency, and ease of doing business, which was very welcome. For the real estate and construction sector, however, it was a bit of a disappointment as many expectations remained unmet.
Office space update
Transaction activity dipped by approximately 15% over the previous month, with Bangalore accounting for almost 50% of the overall space transacted. Pune and the Delhi National Capital Region (NCR) also saw strong transaction activity (about 30% of the total transacted space in leading cities) during February. Cities such as Bangalore, Hyderabad and Kolkata observed an increase in occupier demand in the month. Few large sized transactions (above 100,000 sq. ft.) were also concluded in Bangalore, largely concentrated in locations such as the Outer Ring Road (ORR) and Electronic City. Among the transactions concluded, Tech Mahindra committed around 140,000 sq ft in Goldhill Supreme, Walmart t ook up around 130,000 sq f t in Salarpuria Aura, and RBS Business Services leased around 100,000 sq. ft. in RMZ Ecoworld.
Occupier interest also remained strong in micromarkets such as Gurgaon in the NCR; Thane and Airoli in Mumbai; ORR and Electronic City in Bangalore; Banjara Hills, and Madhapur (IT Corridor) in Hyderabad; Hinjewadi, Aundh, Talawde and Kharadi in Pune; and Central Chennai, with demand mainly driven by IT/ ITeS, banking / financial services and telecommunications majors.
Housing market update
Demand for ready residential properties remained subdued and the quantum of residential unit launches also remained low during the month. While the focus remained on the mid-end segment, the total number of launches declined due to abundant availability of ready- tooccupy inventory and cautious buyer sentiment. Most of the housing projects were launched in Bangalore and Chennai in the mid-end and high-end segments (measuring 100–700 units), while other cities attracted limited new launches during the month. Going forward, residential markets are likely to see stable price points with a gradual pick up in launches in most leading cities.
Organised retail space
High streets in Bangalore, Hyderabad and Chennai saw healthy demand from F&B, and apparel and accessories retailers. According to CBRE’s latest report, How Active are Retailers Globally, around 6% of global retailers would be targeting India in 2015.