Real Estate slowdown: 5 factors that can revive the sector

http://www.financialexpress.com/article/economy/real-estate-slowdown-5-factors-that-can-revive-the-sector/125918/ Real Estate slowdown: 5 factors that can revive the sector

The real estate slowdown in India appears to be taking much longer to get stable. The sector has been going through a rough phase with inventories piling up and sales down. Declining consumer trust in the sector can be revived if developers exhibit appropriate construction progress in order to avoid fear of delays in completion. To counter sales developers have shown caution with controlled launches. However, if market trends were anticipated beforehand such moves should have happened earlier. Sales of residential units declined significantly over the last two years, particularly in the initial periods.

The number of units that are sold from both new and old projects every quarter form the sales rate, and from 14% in 1Q13 this has steadily declined to below 9% as of mid-2015, thereafter remaining stable at low levels, according to global property consultant JLL India. The report further added that the slowdown trend has been observed in seven leading metros with the situation particularly grim in markets such as Delhi-NCR, where the sales rate has declined by 10%. Despite a big fall in Pune, Hyderabad and Kolkata, the sales rates of these cities still remain in double-digits at 12-13%.

Mumbai’s fall was moderate, owing to low sales rate throughout the said period. Suvishesh Valsan, AVP – research & real estate intelligence service, JLL India lists out five broad factors that influence real estate markets, including country’s GDP and employment scene, credit availability, interest rates, housing supply dynamics and consumer confidence. These factors indicate the formula for revival could lie within the reach of builders and policymakers.

1. GDP and employment scene: In contrast to the housing sales rate, India’s GDP has been rising consistently over the last two years from 6.9% y-o-y growth in fiscal year 2013-14 to 7.3% in 2014-15, and is expected to be over 7.5% in 2015-16. Also, the monthly reports of leading recruitment firms in India suggest that hiring activity has picked up pace, particularly in the last year.
2. Credit availability: RBI data on the growth in home loans as well as the growth in credit to the construction sector (including loans to public housing agencies) reveals healthy credit offtake. Home loans have grown at a 17% y-o-y average over the last two years (until May 2015) whereas bank credit given to the construction sector grew at 22% y-o-y – one of the highest levels of all sectors.
3. Interest rates: CPI inflation has declined sharply by around 3% in the last two years and it now stands at 5% (as of May 2015), which is well within the comfort zone defined by the Reserve Bank. Consequently, the RBI has responded with three rate cuts (totalling 75 basis points) since the start of 2015, with a possibility of more rate cuts in the near-term.
4. Housing supply: Developers have consistently launched close to 60,000 units every quarter since 1Q13 despite the slowing demand. As a result, developers’ unsold stock has mounted, particularly in NCR-Delhi, Mumbai and Chennai.
5. Consumer confidence: With above factors portraying a positive picture for the economy, the influence on consumer confidence is positive. This is also borne out by various market reports. However, the rising consumer confidence has not translated into higher demand for apartments.

Real estate slowdown: Key points – Delhi-NCR, where the sales rate has declined by 10% – Pune, Hyderabad and Kolkata, the sales rates of these cities still remain in double-digits at 12-13% – Mumbai fall was moderate, owing to low sales rate throughout the said period. First Published on August 26, 2015 3:02 pm© The Indian Express Online Media Pvt Ltd

Real estate is second largest employer: Siddaramiah

http://www.siasat.com/news/real-estate-second-largest-employer-siddaramiah-819929/Real estate is second largest employer: Siddaramiah   

 Bengaluru: Real estate sector is the second-largest employer in India after agriculture and is slated to grow by more than 20 percent in the next decade, said Karnataka Chief Minister Siddaramiah on Saturday. “Real estate is the second most active sector attracting private equity investors in the last ten months,” he said at the seventh convention of the National Association of Realtors (NAR), touted as India’s biggest real estate convention.

 Zeroing in on the state, Siddaramiah said Bengaluru is the fastest growing city and top real estate market in India beating other big cities like Mumbai, Hydeabad, and National Capital Region (NCR). Leading real estate player Prestige Group’s chairman Irfan Razack said that the real estate industry played a pivotal role in bringing hundred of large global MNCs like Amazon, JP Morgan and many others to come and set up shop in Bengaluru.

Siddaramiah also said that while Bengaluru is known as the IT capital of India, this industry would not have grown without the important role played by the real estate industry. “Bengaluru consumes eight million square feet of real estate space every year and produces 80,000 jobs,” said Razack, adding that the government is the biggest beneficiary of the real estate growth in India as it earns a huge amount of revenue through stamp paper, registration, taxes and others. As many as 1,200 delegates from various nationalities attended the NAR – India to deliberate on the crucial issues pertaining to real estate.

 Realtors, developers, architects, lawyers, investors, venture capital firms, equity funds, chartered accountants, financial institutions, property valuers and others from across India participated in the event. “It (NAR – India) also helped create a platform for over 26,000 companies and 1.2 million members across the globe to network seamlessly and do business,” said its chairman Farook Mahmood.