Real estate professionals are unanimous in one prediction: Things will start looking up for the sector only in the second half of 2014, after the general elections, when clarity on the new government will emerge and businesses start investing.
2013 was clearly a dull year for real estate, when all asset classes — residential, office and retail properties — barring some cities such as Bangalore saw a steady decline in absorption.
Residential
Absorption of residential units in most cities such as Mumbai, Delhi-NCR and Pune went down in the first three quarters of 2013.
The year 2013 was a drag for the Indian economy, with poor macroeconomic conditions. Slowing income growth, sustained weakness in the rupee, sky-rocketing inflation and high borrowing rates combined to make consumers vary of spending,” said Anuj Puri, chairman and country head of realty consultant Jones Lang LaSalle India (JLL).
According to JLL, weighted average prices of homes across the country rose 10 per cent year-on- year during the first three quarters of 2013. But growth was skewed towards suburban and emerging locations, as opposed to city sub-markets. Rental values rose eight per cent during the period.
Consumer confidence is expected to remain subdued in first two quarters of 2014 due to uncertainties surrounding general elections and macro-conditions. “However, after the elections, fence-sitting investors are likely to become active. The increase in absorption of residential units will help reduce the currently large inventory holdings of developers,” Puri said, adding residential prices are expected to raise 10-12 per cent during 2014.
According to a recently released report by UK-based Knight Frank, about 45 per cent of Mumbai’s under- construction properties are unsold, indicating stress in the realty market.
Says Sunil Rohokale, managing director of ASK group, an investment manager: “In 2014, interest rates will be high in the first half and will go down in the second half. When rates go down, sales will happen and absorption will improve.”
“We expect residential to experience traction in terms of sales volume and launches at the start of the second half of 2014 and there would be an upward pressure on prices. The office segment is driven more by economic rationale and as a result, the uptick is likely to take place with a quarter lag,” said Shishir Baijal, chairman and managing director, Knight Frank India.