New Delhi, Dec 27, 2014: The India real estate market showed tremendous resilience in the face of head winds from both supply and demand. On the supply side, the first six months saw a gradual increase in the total market supply, as everyone was waiting for the outcome election at the center. Year 2014 a marginal growth in supply and inherent demand was also demonstrated. While the launches of new projects have continued unabated over the course of the year, the demand has seen a slight drop on account of the negative sentiments, inflation and economic slowdown. The outcome of supply being up and demand showing a marginal decline has led to a multiplier effect to the sales numbers of the developer community. However, despite this, the prices across all micro markets have been trending upward through the year and seemed to be poised. This indicates that there is clearly a demand and developers are overall sceptical with their inventory thereby, however managed to keep the being price with an upward bias, through sales and marketing incentives. Inspite of poor sentiments and comparison to Mumbai and NCR, the overall India real estate customers continued to buy homes. Though the numbers were less it was not reduced to an extent which caused price correction.
Trend in prices
The wakeup call to the NDA government has led to a number of policy steps being undertaken over the last quarter. Post the outcome of the lok-Sabha elections indicating the likelihood of an NDA government being formed, has led to a mood of wait and watch optimism for 2014. With inflation at current levels, finance not being available to developers leading to high costs of finance, delays in approvals leading to higher holding costs, does not has much head room for prices to drop. The prices will continue to see an inflation-led increase across micro markets through the year.
However, a clear mandate set up by the ruling government on “Housing for all” has set the stage for a smart recovery of sentiment and correspondingly purchase of homes in the coming year. I anticipate that with robust policy implementation around SMART Cities, liberalising FDI in real estate, REIT funding, LARR & RERA bill, will see a boost in the realty sector in the second half of the year 2015. There is an inherent need for homes across the country and while this need has translated to marginally lower demand during 2014, which is expected to follow up in the coming year, it is a matter of time before the need converts to demand. Hopefully, 2015 will be the year this happens in a big way.
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