Realty: OUTLOOK FOR 2012

Realty: OUTLOOK FOR 2012

With the year coming to an end, what does the future hold for the real estate sector? Here are some reactions:

Irfan Razack, CMD, Prestige Group

“This year has been a particularly good and vibrant year for the realty industry in South India, especially Bangalore. In the backdrop of poor growth in global economies, India continued to be resilient and proved to have a pretty exciting year on-ground. We expect this positive reaction to continue into 2012 with a healthy Q1 (calendar year). The year has also seen good response in the residential segment in both the luxury and the mid-segment. The commercial and retail segments have also witnessed steady and robust leasing through the year.

From a home investment perspective I feel realty prices will only increase over time or face stagnation at the most, as rising input costs further makes it difficult for any price correction to happen in the near future. However, on a positive note, we can expect a possible decrease in interest rates in the year ahead.”

Sachin Sandhir, Managing Dir­ector, RICS South Asia

Through the course of 2010, the realty sector evened out into a level playing field, with enough traction in the market to hold investor interest, with several on-going projects being delivered and others being launched. However 2011 has been characterised by a series of challenges both on the domestic and external front. Political instability, issues related to governance, land acquisition, delays in regulatory processes and project clearances have weighed down on aggregate demand.

Investor sentiment has been impacted due to inflationary pressures and rising interest rates in the country coupled with the on-going economic crisis in the Eurozone and the US. Slower GDP growth rate projections; shortage to the tune of 85 per cent in real estate and construction professionals available today (as highlighted by a recent RICS research) and high debt burden of real estate developers are also likely to impact investor confidence in the sector in 2012. Consumer sentiment has also been affected as a consequence of the land acquisition issue in the Noida micro-market, which has had some impact on buying decisions in the NCR region.

Overall, with interest rates rising and the cost of home loans becoming dearer, coupled with continued price escalations - oversupply has set into the residential market in certain micro-markets like Mumbai and Delhi NCR. While, markets in the South look to remain relatively stable.

Overall, the sentiment for 2012 is expected to of cautious optimism. Given the inflationary pressures that continue in the market, the RBI could once again look at increasing the interest rates which could have a direct bearing on the residential market. Also, absorption rates are likely to remain on the lower spectrum with fewer project launches expected in 2012. Retail property, on the other hand might see an uptake, now that 50 per cent FDI in retail has been allocated.

However, given the lack of political and economic consensus on the decision, international retailers may play the ‘wait and watch’ game, prior to setting up business in the country.”

Neville Vaswani, Managing Director, Vaswani Group

The year 2011 has seen a significant rise in the demand for luxury residences in Bangalore, despite the fluctuation in the market. Also Bangalore has emerged as one of the preferred destination for realty, thanks to the comparative cost advantage which Bangalore enjoys in comparison to cities like Mumbai and Delhi.

Though it was a challenging year for all the real estate players but it has not affected new prominent projects coming up.We hope that the coming year will be a better year for the real estate industry, with far less fluctuation in the market and  expecting a lot of correctional measures to be taken by government to stabilize the economy.

With economy coming back to a normal state, will give a major boost to the confidence of investors and buyers in the real estate market again. survey

According to a survey taken up by, the year 2011 can best be described as a lacklustre year for the Indian real estate sector. There were several headwinds that prevented the sector from delivering to its full potential. High property prices and rising home loan interest rates kept the home buyers away from the property market. Property transactions in major Indian cities were down by 20-40 per cent for the year.

As far as purchasing a home is concerned; arranging funds becomes the most critical aspect. Usually home buyers rely on home loans for making a property investment.

Increase in REPO rate

In the recent past RBI has increased the benchmark REPO rate 13 times in the past 18 months. Home buyers seem to believe that RBI is at the end of the interest rate increase cycle, majority 41 per cent expect the home loan rates to fall in 2012. On the contrary, 30 per cent of the home buyers feel the home loan rates will continue to climb up. The remaining 29 per cent feel that home loans would remain stable in the coming year.

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