What happened in 2013 and what can we look forward to in 2014 in the residential real estate sector?
The year 2013 was significant for the real estate sector in more ways than one. Even as the industry grappled with reduced investor confidence, the last year saw the tables turn in the favour of buyers. Says Anuj Puri, Chairman and Country Head, Jones Lang LaSalle India in his review report, “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. This reflected visibly in the Indian consumer confidence index, which has been falling consistently over the last three quarters.”
There was also a movement towards better transparency in terms of policies in the last year. First came the Real Estate Regulatory (RER) Bill and then the Land Acquisition, Resettlement & Rehabilitation (LARR) Bill. Puri, however, warns that “typical to the housing sector, no reform is without its unique drawbacks, flaws or limitations. Both the bills had clauses or bye-laws that threatened to further escalate prices. While the regulatory bill raised developers’ funding concerns by proposing to ban the practice of pre-launches, the land acquisition bill rendered the process of acquiring land costlier and more time-consuming.”
Another report by Makaan.com notes that the “most important positive factors for the end-user was stability in the property prices. Most of the property markets exhibited 10 to less than 10 per cent rise”. Slow economic growth since April 2013 has also had its effect on the sector. “The pace of sales has gone down and has remained slow with the slowdown in the economy,” according to Makaan.com.
So what does 2014 hold for home buyers? Puri explains, “Property market in 2014 will be driven by end users. Majority of home buyers want to purchase a property in 2014 for self-use as they are currently staying on rent.” Experts note that the year 2014 may experience a very positive shift from the earlier years and will bring in much required stability in the property market.
The Makaan.com report on 2014 brings some cheer as well. . “Affordable housing i.e., housing between 0-40 lakhs will continue to be a preference for a majority of home buyers with almost 60 per cent buyers opting for this sector. Mid-segment housing (Rs.40 lakhs to Rs.1 crore) will be the preferred budget category for 34 per cent of home buyers. High-end housing (Rs. 1 to Rs. 2 crore) will be preferred choice for 6 per cent of buyers whereas only 1 per cent of buyers will be looking for luxury housing (over 2 crore).”
“Currently, more than 16,000 residential units across all categories are expected to be complete in 2014 which will infuse more ready to occupy stock in the market,” adds Murthy.
While the changing regulatory scenario and political upheaval due to the upcoming general elections may lead to a demand slowdown in the short term, Murthy predicts that, “however the situation is expected to improve after the first quarter of 2014.
” She is also hopeful that the residential property market will witness a revival in demand for high-end properties.