While the Indian real estate sector saw steady growth in the year 2014, the market is riddled with speculation as to whether it will see a positive turnaround in 2015 in terms of growth and expansion. This article explores some of the finer points indicating how India’s real estate volatility will react in 2015 and what it has in store for real estate developers and homebuyers across the country.
State of Indian Realty in 2014:
In 2014, the Indian real estate sectors influenced commercial market sentiments due to rising prices in commercial properties and increased demand for residential buildings. In the same year, the Indian government announced various policies and measures aimed at bolstering the Indian real estate sectors.
For example, the government announced the amendment of the ordinance relating to land acquisition laws to simplify land acquisition procedures hampered by the prevailing consent clause. The bottom line of the announcement is that it will speed up construction work on several projects in the future, as the no-consent clause will speed up the land acquisition process for builders and enable them to complete their projects faster. It will also help the Indian government fulfill its dream, “Home for all by 2022”.
Once implemented, the relaxed rules on land acquisition laws will fuel the expansion of Indian real estate. In addition, several multinational companies entered the Indian real estate sector with the prospect of earning a lot, as the country’s real estate sectors offer a wide spectrum of growth and income opportunities. Also, some employment agencies predicted that there will be multiple job opportunities in information technology and other sectors in the country, which will lead to the expansion of Indian real estate in 2015. Why? Well, job creation will make people financially stronger and they will be able to afford luxury housing in the days to come.
Explanation of the consent clause
According to the consent clause, the real estate actors must request the permission of the owners to use their land for the construction of their housing projects (the real estate actors). As a result, the builders suffered heavy losses, as the owners were slow to grant approval. Consequently, the builders had to pay fines to the buyers, since they did not deliver the housing projects on time due to the delay in the approval of the land acquisition.
Indian Realty 2015: Chance of Change
The formation of the new government in India in 2014 and the reform policies and measures that it announced later have encouraged the sentiments of the Indian reality with welfare factors. For example, the Reserve Bank of India stated incentives with the aim of boosting infrastructure financing and keeping the real estate sectors afloat with enthusiasm. In addition, the government declared that it will standardize the rules on FDI (foreign direct investment) in Indian real estate, which, if implemented, will boost cross-border investment and financially boost the real estate sectors.
These are the factors that will determine how the Indian real estate sectors will be influenced in 2015:
stable inflation – This is one of the most notable factors indicating positive growth of Indian real estate. Considering that higher inflation contributes to the decline in real estate, this time, the Indian real estate sectors do not have to face a worrying increase in property inflation. Therefore, the prices of properties throughout the country will not increase, which will increase the sales volume of properties in the country.
Also, RBI (Reserve Bank Of India) is expected to lower its repo rate. If it happens, there will be easy EMI deals from banks to homebuyers on their dream properties. Even indifferent buyers, who have been waiting for property prices to fall, will buy their dream homes with an easy EMI payment from their lending banks. In fact, lower loan rates will be a win-win situation for both buyers and builders. Builders will be able to sell their projects to buyers and buyers will take advantage of homes with a lower EMI payment.
The Indian real estate sectors are going through a phase of reorientation. For example, builders focus on developing low-cost housing projects for clients from middle-class families. However, there has also been a development of large-scale luxury buildings/villas to serve the purpose of buyers looking for a relatively more comfortable, luxurious and premium place to live.
Key reasons indicating a positive turnaround for Indian Realty in 2015
According to the National Housing Bank (NHB) report, the real estate sector is one of the key factors in job creation. Furthermore, the overall contribution of real estate industries in the development of schools, townships, residential apartments, hospitals, and other residential segments dominate the market share. Manufacturing industries are directly influenced by real estate, and more than 35 million workers are employed in real estate industries. They indicate that Indian real estate is full of potential to enable desirable growth and can greatly influence investors.
India’s new government made the real estate market visibly enthusiastic. As expected, the government took a proactive approach and tried to instill business confidence among investors, builders and buyers by announcing various reform policies, such as relaxed FDI rules and flexible policies on land acquisition laws.
Well-known agencies such as the World Bank, Moody’s and the IMF have predicted that India’s GDP growth will increase by 6.3-6.4%. As a result, it will allow a greater advantage in market sentiment. In addition, the depletion of the value of the Indian rupee in the international market, the improvement of export and the flexible land acquisition laws in India will boost the country’s real estate sector in 2015. Recently, the country witnessed increased consumption in commercial properties by foreign companies in 2014. This is an important turnaround despite the country’s economic slowdown in 2014.
