The tottering Indian realty sector seems to be unaffected by the New Year positivity so far, as apprehensive investors are still reluctant to venture into the realty space. The end users, too, are in wait-and-watch mode in the hope of bigger sops in the forthcoming budget. Thus, according to experts 2017 January has been the quietest for the property markets all across the country in the past five years. With the long-term positive effects of demonetisation not likely to manifest at least in 2017, the stakeholders are currently taking stock of the immediate negative fallout of 8/11. The sucking out of Rs 1,000 and Rs 500 notes from the system has left the real estate sector virtually paralysed for over two months now. Sale volumes as well as new launches showed a considerable decline in the last two months of 2016. According to the half-yearly report ‘India Real Estate’ by Knight Frank released earlier this week ales volume and new launches fell by 23 per cent and 46 per cent each in the second half of 2016. “The fourth quarter of 2016 saw a significant drop by 44 per cent year on year and new launches fell by 61 per cent”, the report mentioned.
The sector witnessed a notional loss to the tune of Rs 22,600 crore, in the top eight cities. The government has witnessed a loss of Rs 1200 crore by way of stamp duty revenue loss, in the residential segment, the report said.
According to Shishir Baijal, Chairman and MD Knight Frank India, “The fall in Q4 was intense, H2 2016 ended below H2 2015...2016 ended at launches and sales being lowest since the global financial crisis.”
While the tier II and III cities and secondary market have been the worst affected so far, major metros have also seen sales and demand plunging in the past 60 days.
The national capital region has been the most affected witnessing a de-growth in demand and supply by 29 per cent and 73 per cent, respectively.
The Mumbai Metropolitan Region (MMR) saw launches plummet by 53 per cent and sales by 26 per cent, according to Knight Frank report.
Bengaluru, too, saw a fall for the first time since 2013 with new launch and sales declining by 17 per cent and 7 per cent year on year, respectively.
According to industry mavens this slowdown is likely to continue till the end of 2017 and with the RERA implementation in the next three months the developers are likely to reorient and reorganise their operations. “It will be important to see how developers recalibrate their business to the changing environment, and whether buyers capitalise the opportunity of various reforms and change,” added Baijal.
Office market remains sunny
The office real estate segment has remained positive and is expected to grow steadily in the new year also. The office market witnessed a high annual absorption of over 43 million sq.ft. in 2016, registering a growth of 9 per cent on a y-o-y basis. According to real estate consulting firm CBRE’s India Office MarketView Report - Q4 2016 over 35 million sq ft supply was added in 2016 with India's office stock reaching a milestone of over 0.5 billion sq.ft.(as of Q4 2016)- higher than several East Asian economies. In NCR the quarterly leasing figures doubled as Gurugram led with a share of 61 per cent. Commenting on the findings of the report, Anshuman Magazine, Chairman -India & South East Asia, CBRE said, "India continues to show positive movement, despite global uncertainties. Policy initiatives undertaken by the government in the recent pastis expected to bring transparency into the sector, which is a much needed step towards enhancing consumer and investor confidence." Growth in this segment is going to remain steady over the next quarter with corporates looking to expand operations.
While all eyes are on the Budget, government's policy initiatives (RERA and REIT), demonetisation and falling interest rates are going to boost transparency in the rtealty sector opening doors for investment in the residential as well as commercial segment and by that standard 2017 may not be as bleak as its beginning.
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