Residential sector poised for growth this year
All indicators point towards a convincing revival for the housing sector by the end of 2016
Iadverse global economic circumstances, put a lot of pressure on earnings, exports and overall development. The government was able to contain the fiscal deficit to the budgetary target of 3.9%, and is working on lowering it further to 3.5% in the financial year 2016-17.
The RBI has cut key interest rates by 1.5% since January 2015, and the repo rate has come down to 6.5%. This has started showing a visible positive impact on the economy. I ndustrial growth crawled back into the positive zone at 2.1% in March 2016, crude oil prices stabilised at a favour- able price band for India, CPI inflation decreased further at 4.83%, and there are morethan- optimistic expectations for a good monsoon this year. Factoring all this in, the Indian economy looks well poised to grow at a healthy rate of 7.7 to 7.8%. Lower than expectations, inherent weaknesses in the system and inadequate infrastructure devel opment continue t o i mpede f aster growth.
The year 2015- 16 saw traction in urban demand, and the current financial year is expected to usher in growth in the rural economy on the back of favourable monsoons. Agriculture contributes 15% to the country’s GDP; and with 2016 being declared a ‘La Niña’ year, further growth is more or less assured. The impact of La Nina phenomenon on our economy is noteworthy. The average growth in GDP/ private consumption/ investment on a year-on-year basis is 8.9%/7.4%/10.4% during a La Niña year, compared to average growth of 5.8%/5.2%/7.2% on a year-on-year basis in a non-La Niña year.
The signs of economic revival, along with foreign investment coming in the country, are evident in the share market offering 14% returns over a 15-year period ending in March 2016. FDI increased in the country by a whopping 37% during the financial year 2015-16, going up to $39.2 billion from $28.78 billion in the previous financial year.
Judging by how the economy is moving, there is definitely a rationale for positivity in terms of business performance. Let us take a closer look at how the residential real estate sector has been performing, and what lies ahead: rise in sales in first quarter cycle in 2016. This quarter saw a sale of 42,521 units compared to 39,001 units sold in the fourth quarter cycle in 2015 - an increase of 9%.