Saturday, 3 January 2015

2015: A Year of Anticipation

People are likely to press the buy button only if interest rate cuts and tax sops are announced; developers will focus on affordable housing.

The year 2014 saw people shying away from buying their first homes, choosing to wait for prices to correct and the apex bank to slash interest rates. Unfortunately for them, the wait was in vain. While developers did not lower quoted prices, they went ahead with flexible payment options, freebies and add-ons and the Reserve Bank of India chose to control inflation rather than push demand-led economic growth.

So, will 2015 be different? One expects developers to become more earnest about right-sizing and right-pricing their offerings. Smaller, yet better-designed and more efficient homes will define the residential market space this year and selective correction may take place in over-priced cities, say experts, adding the market will take at least 12 to 18 months to start looking up but it will have to be backed by interest rate cuts and creation of more jobs and the resulting demand for residential units.

The year will see only end-users dominating the residential space and very few investors. There will be demand primarily for value-for-money units in the NCR. Areas that will look up will be those offering units in the 5000 to 6000 per sq ft range or the 60 lakh to 1 crore, depending on the location. These will include Ghaziabad, New Gurgaon, Neemrana, Dharuhera and Faridabad.

According to Anuj Puri, chairman & country head, JLL India, smaller, yet better designed and more efficient homes will define the residential real estate market in 2015, and selective corrections in some of the over-priced cities will help bring about faster sales for stagnated supply of larger configurations. Townships will become more prevalent, and the supply of luxury homes will moderate to align with the slow demand dynamics for these offerings. Affordable housing will clearly be the flavor of the season.

Higher demand for office spaces means that more employment will be generated, which in turn will fuel residential demand. As a thumb rule, for every 100 sq ft of office space that is taken up, there is 600 sq ft to 800 sq ft of residential space which is needed.

“The Government should focus on getting the regulatory bill passed as the real estate market is experiencing significant pain, especially the investor-driven markets. As many as 50% sales in a year in NCR are driven by investors. As a matter of fact, NCR sales in a year equal that of sales in Chennai, Bangalore, Mumbai put together. The end-user this year will continue to be cautious unless there are interest rate cuts and more value-for-money products in the market,” says Ankur Srivastava, chairman of Gen-Real Property Advisers.

Rajeev Bairathi, executive director, North & Capital Markets, Knight Frank India, is of the view that the market is awaiting fresh triggers such as reduction in interest rates on home loans, a further improvement in buyer sentiment on the back of employment growth and a healthy double digit growth in corporate staff compensation packages. All these factors are expected to improve affordability which should make year 2015 much better as compared to 2014 in terms of sales volume. "We, however, do not expect any significant appreciation in prices for another two to three quarters".

There are some experts, however, who are optimistic about the market and say it may start looking up in the second half of the year. “The anticipated pick-up demand should take place from the second half of 2015, though the demand could be boosted earlier if interest rates are reduced and/or the Government introduces some additional taxation sops in next year’s budget. However, we can also expect to witness increased institutional purchases of large number of units by investment funds, who have been setting up dedicated funds to purchase units in bulk during their construction phase and off-load them once they are completed. Developers too could increase the supply by launching more units, if the Government provides the right incentives by reducing the time taken for regulatory approvals, removes bottlenecks in the supply of raw materials, etc,” states an analysis by Cushman & Wakefield.

Source: PropertyatNeoDevelopers.Wordpress.Com

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