Mumbai/New Delhi: After a sluggish 2014 marked with falling housing sales and high costs, developers are betting on lower borrowing costs and a turnaround in the real estate market in the new year.
Developers were hopeful that property market, which has been witnessing demand slowdown since last few years, would be back on track in second half of 2014 on improved sentiments after the new government came to power but that did not happen and rather housing sales were slow even during festive season.
In commercial real estate, leasing of office space was higher although the activities were subdued in retail segment. Rentals remained stable during the entire year.
Like 2013, cash-starved developers faced the problems of huge unsold housing stocks and buyers' protest against delay of up to 6-7 years in delivering projects, forcing them to focus on completion of projects instead of launching new ones.
Effort by developers to boost demand by offering discounts and relaxing payments schedules did not help as home buyers kept waiting for correction in prices and interest rates.
Amid these negativities, some positive announcements came from the new government in form of approval for Real Estate Investment Trusts (REITs), relaxation in rules for foreign direct investment (FDI) and setting up of 100 Smart Cities.
These did not have an immediate impact on the market, but realty firms and property experts believe that the interest of global investors would revive in the sluggish property market with these two measures.
The year also witnessed some big-ticket property deals and increased investor interest in realty portals.
While in the beginning of the year realty major DLF sold luxury hospitality chain Amanresorts for Rs 2,200 crore, the Sahara group sold 185 acre land in Gurgaon to M3M India for over Rs 1,200 crore this month.
Private equity (PE) investment in the realty jumped more than two-fold to Rs 8,900 crore in January-September period and the figure is likely to cross Rs 12,000 crore by year-end.
"This year was challenging. It was worst in five years in terms of sales," CREDAI, the apex realtors' body, chairman Lalit Kumar Jain said.
He noted that the realty market would be better next year in terms of sales, if interest rates go down and the government brings reforms like single-window clearance, online approvals for projects, lower taxes and permission for building more area on a land parcel.
Property consultant JLL India chairman and country head Anuj Puri also said, "2015 will definitely be a good year for the real estate sector...as borrowing rates are sure to go down from the current levels".
"...with property prices staying stable and good deals being offered by developers in order to clear their inventory, fence-sitting buyers be further encouraged to press the 'buy' button," he observed.
According to JLL, housing sales are estimated to have declined to 1.75 lakh units this year in primary markets of top seven cities from nearly 2 lakh units.
Developers are sitting on close to 30 months of unsold inventory in the mid-to-high-end segment.
Net absorption of office space is estimated to cross 30 million sq ft in 2014 as compared with 23 million sq ft last year, according to Cushman & Wakefield.
Along with poor housing sales, realty sector this year witnessed adverse court judgments and regulatory orders against some developers including DLF, the country's largest realty firm.
In April, Allahabad High Court had ordered to demolish realty firm Supertech's two 40-storey towers in a Noida housing project. The two towers, Apex and Ceyane have a combined 857 apartments, of which about 600 flats were sold.
Next month, the Competition Appellate Tribunal (COMPAT) upheld Rs 630 crore penalty imposed on realty major DLF by the Competition Commission of India (CCI) for unfair business practises.
About Us
MCHI-THANE has always been very clear that fine housing complexes and shopping malls cannot stand in isolation. A great City is the sum total of great buildings, great infrastructure and great people. MCHI has been committed to growth of the real estate sector and is credited with the harmonious growth and rise in quality and standards of construction in Thane City in the past decade.
Its aim as an Association of Developers has been to seek rational rules and regulations which are uniformly applied across the board as this will to a great extent result in speedy construction, cost reduction, fair pricing and a push for better quality standards at par with the developed world, with a high level of transparency.
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