Residential Property Market On Growth Path
With the fundamentals of recovery now firmly in place
, we have reason to look forward to better times ahead for Indian real estate . The India growth story is one that many nations would love to emulate. In the face of significant challenges, this country has proved extremely resilient to the fallout of the global crisis. Economists project India to be the fastest-growing economy in the world by the year 2018, and it is even now the second fastest. Our economic growth was to the tune of 8.6 percent in the last quarter of 2009-10, was moderated only to 6.7 percent in 2008-09 immediately after the global economic slowdown. In the latest fiscal, the country has registered a GDP growth rate of 7.4 percent during the latest fiscal.
This is a lot better than what many of the more developed nations can lay claim to. The Finance Ministry expects India's economy to grow by 8.5 percent in the current fiscal year, and we are looking at the prospects of a full recovery over the next two financial years - with up to 8.75 percent growth in 2010-11 and nine percent the subsequent year.
The per capita income grew by 10.5 percent to Rs 44,345 in 2009-10 against Rs 40,141 during the last year. India is expected to see an inflow of
investments through foreign institutional investors to the tune of USD 76.65 billion by 2014. Finance, insurance, real estate and business services grew at 9.7 percent as opposed to the 10.1 percent in 2008-09 - an astoundingly minimal drop, given the enormity of the economic turmoil witnessed during the recession. There are doubtlessly some concerns about the European sovereign debt problems and their possible negative impact. But on a more positive note, there is a possibility that global firms of European origin may now consider investing in growing markets like India.
The implications in terms of real estate growth are obvious. Increased national and international business activity and expansion on Indian shores, coupled with increased domestic spending power and aspiration, combine to spell assured growth on all fronts of the property market. In the residential space, transactions were taking place primarily between speculators and investors, with no consideration given to how much end-users were actually willing and able to pay. Considering that almost 80 percent of real estate developed in the country is residential space, this correction was bound to happen anyway.
The issues that our real estate market faced over the last year or so were not primarily the result of global economic forces. This slowdown was one whose time had come. By the same coin, the revival phase follows just as logically. The factors that drive demand for the Indian real estate - a large, young and aspirant workforce, gradual but consistent liberalisation reforms and a high rate of consumer and private-sector savings - are still very much in place.
Moreover, this market is gaining in transparency. According to the 2010 Global
Real Estate Transparency Index that JLLM just released, India has yet again surged ahead in its real estate transparency ranking. The country's Tier 1 cities are currently ranked No 41 among nations surveyed, while India's tertiary cities have graduated from the Low Transparency tier to Semi-Transparent.
The increasing transparency levels are a reliable indicator that the country is adapting fast to the ways in which real estate business is done in more developed countries. The result is that Indian real estate is gaining swiftly in international credibility. The downturn taught the entire real estate sector some valuable lessons. We learned that it is still the consumer that rules the market, and that players cannot entirely replace client orientation with personal business objectives. The slowdown also drove home the dire need for increased transparency in dealings and the ability to stay nimble and flexible in business strategies.
We learnt that demand is not dictated by supply. Supply must go where demand exists, and demand in real estate terms is a constantly shifting and metamorphosing concept. In other words, we must have the ability to adapt quickly to changing market dynamics.
For a quick snapshot of what is currently happening in Indian real estate, the first quarter of 2010 saw an increase in residential launches, which stood at 62,270 units against 44,670 units in the fourth quarter of 2009. The absorption rate of residential units in the first quarter of 2010 stood at 21 percent, showing a marked increase from the 15 percent of the fourth quarter of last year. Average capital values appreciated in this period, spurred on by the high absorption witnessed across residential markets through 2009. The immediate outlook on the residential segment is positive.
Courtesy Times Property Dtd. July 16, 2010
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by: Zameen Deepak
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