Real estate in India has
been reeling under a slow-down for the past 3 years, with sporadic signs of
recovery. The first half of 2016 has also been a mixed bag, however the
recovery signs are much stronger and one is looking forward to the return of a
positive sentiment with an all-round growth in 2017.
New Project Launches
The overall new launches in 2016 has seen a drop of 9% vis-a-vis
2015. However, if we look at the numbers in 2013, there were 232,490 units
launched, this figure has come down to 107,120 in the first half of 2016; a
whooping drop of 54%. Almost all major cities recorded a fall in new launches,
Mumbai being the only surprise which saw a growth of 29% from 2015. The reasons
for this fall are well known, with surplus inventory in all major cities the
builders are treading cautiously; secondly, the surplus inventory means lack of
capital in the market, for new launches. These trends will take some more years
to actually see a reversal and the major cities may not see any, as the growth
focus has now shifted onto tier 2 and 3 cities.
Real Estate Market Sales
The lowering of interest rates, passage of the real estate bill
leading to the clearance for setting up regulatory authorities, ironing out if
the REITs and market correction, are all factors which have contributed towards
a 7% growth in sales in the first half of 2016. Bangalore and Mumbai recorded
the highest growth of 18% and 23% respectively. However, NCR, Kolkata and
Chennai markets saw stagnation. Mumbai real estate market has been gaining
ground due to the overall Mumbai Metropolitan Region (MMR) which includes Thane
and Navi-Mumbai. Both Thane and Navi-Mumbai have been driving sales due to
their affordability. The real estate markets have grown from 29% to 49% in
these cities giving a big boost to the MMR real estate market.
The drop in new launches and pick up in sales have helped to
reduce the surplus inventory to quite an extend and is the main reason for
revival of a positive sentiment in the market.
Mumbai, Pune, Hyderabad and Chennai have seen a 7% and more
reduction in surplus inventory which has had a positive impact on the real
estate markets in these cities. Mumbai (MMR) has been the biggest gainer which
has seen a fall of 20% in the surplus inventory. Another reason for Mumbai’s
recovery has been the steady demand for office space in the last one year.
Commercial Real Estate
There is some cheer for NCR as it saw an 8% upward trend in
rentals of commercial property. Pune and Bangalore have also seen similar
trends. This has resulted in a recovery for the commercial sector which has
witnessed an overall growth of 12% in the first half of 2016. The delivery
volumes have seena quantum jump from 15.8 million sq. ft. to 19 million sq. ft.
in 2016, compared to similar period in 2015.
Tier 2 and Tier 3 Cities – The Growth Drivers for Real Estate in
India
The facts and figures which have been discussed are for Tier 1
cities and similar figures are still awaited for the tier 2 and 3 cites, which
may be available only by year end. It is very clear that the tier 2 and 3
cities are going to be the growth drivers for the real estate sector in the
coming years, with availability of affordable land packets, lower costs and an
end user driven market these cities are going to witness a Real estate property boom starting 2017.