Raja Mukherjee, Head – Sales & Marketing, Concorde Group
Year 2015 is just round the corner and everyone wants to know what lies in the New Year for them. Real estate world is one such sector which with positive outlook has a potential to fulfil many dreams. Market pundits have already started begun to forecast 2015 as the best year in the current decade when it comes to real estate absorption. According to PWC’s latest report, India will see increased economic growth, and the removal of barriers to FDI will ‘spur demand for construction’ over the coming 12 – 18 months.
Clauses in our policy like lock-in requirement and exit route along with the repressive minimum threshold for built-up area were some of the major factors in reduced inflow of FDI in Indian construction sector. However, following the election of a new government, India’s construction sector is forecast to grow at 7-8 % per year for the next ten years. Government has reduced minimum built-up area as well as capital requirement and have eased the exit norms.
The increased inflow of FDI due to easing of rules in Indian construction sector will surely provide a boost to the real estate sector. It is a positive announcement and will certainly encourage more investors to consider investing in India. It will also help developers get liquidity (much needed) into the system. With such positive announcements, we will see more and more foreign players venturing into promising Indian real estate market. This will also reflect into making things easier for the middle class and real estate more affordable.
An estimated US$1 trillion is being spent on infrastructure over the five years to 2017 and there is increased investment in industrial projects by the government. However, it is the private housing sector that the PwC report highlights as a key growth area.
The Government of India has proposed to release the Real Estate (Development and Regulation) Bill which aims to protect consumer interest and introduce standardisation in business practices and transactions in the sector. The bill will also enable domestic and foreign investment flow into the sector.
‘Under the Sardar Patel Urban Housing Mission, 30 million houses will be built by 2022, mostly for the economically weaker sections and low-income groups, through public-private-partnership, interest subsidy and increased flow of resources to housing sector’, according to Mr M Venkaiah Naidu, Union Minister of Housing and Urban Poverty Alleviation.
Another report from PwC titled ‘Emerging Trends in Real Estate Asia Pacific 2015’ ranked three major metros among the 22 cities surveyed across the region. While Mumbai climbed to 11th position, Delhi’s ranking improved to 14th and Bangalore to 17th, indicating a significant improvement in investor sentiment in the country.
Foreign Institutional investors (FII) across the globe are watching changed economic and political setting in India, and are now beginning to have a consideration about India – a stark difference from the situation just a couple of years ago. Limited Partners also note that if the golden era of the real estate in India were to start now, it would last longer.
However, there are few hurdles before real estate industry hits the top gear. Policy reforms will play a key role and have to be implemented in the next 12-18 months to sustain the interest going forward. With the not-so happy return experiences from the past in the region, Limited Partners are quick to add that cautious optimism on the macro front might not necessarily translate into dramatic turnaround for the Indian real estate sector yet.