India’s residential property market is looking up now with various initiatives announced by the Government. To understand how various market forces have been making an impact, it is essential to look at the overall economic scenario in the country.
Economic Performance:
- FY 2015-16 saw Indian economy become the fastest-growing in the world with a GDP growth of 7.6% despite adverse global circumstances;
- RBI cut key interest rates by 1.5% since January 2015, and Repo rate has come down to 6.5%. Industrial growth crawled back into the positive zone at 2.1% in March ’16, crude oil prices stabilised at a favourable band for India, CPI inflation decreased further at 4.83%, and there is optimism about a good monsoon this year.
- FY 2015-16 saw traction in urban demand, and the current financial year is expected to usher in growth in the rural economy on the back of favourable monsoons.
Let us take a closer look at how the residential real estate sector has been performing:
Real Estate Performance So Far
- The real estate sector saw the worst phase in 2015-16 with sales and prices plummeting. High inventory levels, diminished demand and limited liquidity impacted new launches. As per statistics, new residential project launches reduced by 6% in Q1CY16 over Q4CY15. For FY 2015-16, the number of new launches stood at 1,81,294 units compared to 2,16,082 units in FY 2014-15, equalling a drop of 16%;
- Overall residential sales were down in the FY 2015-16 compared to FY 2014-15. As per recent data, 1,58,211 units were sold in FY 2015-16 as against 1,61,875 units in FY 2014-15 – a drop of 2.2%. However, this quarter has seen sale of 42,521 units compared to 39,001 units in Q4CY2015 – an increase of 9%.
The Road Ahead
Expectations of a good monsoon, falling inflation and residential prices, an improving regulatory environment, coupled with Government schemes like Smart Cities, AMRUT and ‘Housing for All by 2022’, are beginning to have a positive influence. Banks’ are also passing on interest rate cut benefits to consumers. Additionally factors are the setting up of the Real Estate Regulatory Authority, improved funding for the industry and the clearing of roadblocks on REITs. The affordable housing segment saw increased traction on the peripheries of the major cities. Of the total sales, 60% of the properties were priced below Rs. 5000/sq.ft. in FY 2015-16.
The most convincing signs of revival should be visible in the last quarter of 2016 or by the first quarter of 2017.