Raja aristos news - Real Estate Growth to increase by Second-half

Post general election; cuts in interest rates; and corporate expenses are likely to enhance the real estate growth.

Real estate veterans are sure about their anticipation in the growth of the real estate sector in the second half of 2014, after the general election, which may bring transparency in the new government and attract more international and domestic investments.

The real estate sector failed to see the anticipated growth in the year 2013 as all asset segments like residential, office and retail properties witnessed a sturdy drop in absorption sparing some cities like Bangalore.

Mr. Anuj Puri, Chairman and Country Head of Realty Consultant Jones Lang LaSalle India (JLL) says, the year 2013 didn’t turned to be so good for the Indian economy because of the deprived macroeconomic situations, sluggish income growth, continued failing in the rupee, increased inflation and high interest rates made the consumers to diverge from spending.

While stepping into the New Year – 2014, let us look back and take a glance of things that was confronted by the real estate sector in 2013:

Residential Segment
The residential segment went down in the first three quarters of 2013 with the sluggish absorption of residential units in most of the cities like Delhi-NCR, Mumbai, and Pune.

A report by Jones Lang LaSalle India (JLL) shows that during the first three quarters of 2013, the weighted average prices of homes in pan India increased by 10 per cent over year-on-year (y-o-y).  The growth in this segment was seen in the peripheral regions and emerging locations, as against the city sub-markets and the rental values increased by 8 per cent in this period.

Mr. Puri also told ‘it is anticipated that the end-users and buyers optimism will remain down in the first two quarters of 2014 due to qualms of general elections and macro-conditions’.  But, the undecided investors are likely come into form post elections and the piled up inventories will be reduced with the increase in absorption of residential units that will raise residential prices by 10-12 per cent in 2014.

About 45 per cent of under construction properties that are vacant in the Mumbai market shows the pressure in the real estate sector, says a recent report of Knight Frank a UK-based firm.

Mr. Sunil Rohokale, Managing Director of ASK Group and an investment manager also stated that during the first half of 2014 interest rates will be high and will drop in the second half, which will improve the sales and absorption.

Mr. Shishir Baijal, Chairman and Managing Director of Knight Frank, India also said that in the beginning of the second half of 2014 the sales volume and launches in residential to get a hold and the prices may see an upward pressure. 

Office Segment
During 2013, the office realty segment lagged the most, as the end-users delayed in rental activity owing to the largely slowdown and ambiguity.

The office segment is driven more by economic grounds, hence the growth in this segment is likely to take place with a quarter lag.

The office space absorption in the major seven cities of India fell by 14 per cent on q-o-q analysis in Q3 of 2013 that accounted to 6 million sq. ft. against the 7 million sq. ft. of Q2 of 2013, says a report released by CBRE a US based firm titled India Office Market View Q3 2013.

Rajeev Talwar - Executive Director at DLF, the country’s largest developer stated as the commercial real estate will grow only when the individual and corporate earnings rises.  He also added that to see growth in office segment many banks should be allowed to support the sector.

 
It is also anticipated that the vacancy rates in office properties will raise from 18.2 per cent (2013) to 19.2 per cent (2014) as the supply is increasing and the absorption is restrained and with government allowing tax relief for real estate investment trusts, commercial sector will grow, says a report of JLL.

Retail Segment
It is anticipated that the entry of multi-brand retailers will boost the retail sector in 2014.

According to a study by global consultant Cushman & Wakefield (C&W), in 2013 the retail segment observed a 39 per cent rise in mall spaces, though18 malls were delayed by the developers, said

C&W further added that the total vacancy in malls in this segment has reduced by 2 per cent due to the improved rental activities in the newly launched malls that began with a high proportion in possession and the average occupancy of new mall space in 2013 was over 94 per cent.