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The second half of 2010 saw some level of revival coming back to the real estate industry which is projected to grow to US$50 billion by the end of FY2010 at an average rate of 20%. But the industry still hasn’t been able to overcome the blues of global recession. Though the sentiment is quite upbeat among the developers who feel the industry will come back strongly sooner than later, the analysts and market observers while predicting the outlook for 2011 sounded more cautious.
The country’s real estate market size is projected to touch US$180 billion by 2020 but the year 2011 may not see the industry coming in full stream, owing to slower than expected demand for some segments coupled with after effects of global recession. Though the ‘Affordable Housing’ segment would drive the industry as 26 million homes are projected to be required by 2012 to meet the existing demand, the luxury housing segment may take some more time to see demand picking up. Integrated Township which should be the future of Indian housing industry may still see low interest from the developers due to infrastructure burden and long execution period. SEZ and IT Park segment will also see a lean growth period as both manufacturing and IT have not completely overcome the slowdown. The Green Building trend could see some momentum as developers seeing this as a good selling point for their project. But it will take some more time to see more number of green projects coming up in India. Cities like Mumbai which has huge slum base and dilapidated buildings could see more redevelopment projects are coming into existence. Textile mill land development which is again primarily a Mumbai city phenomenon would see more number of projects announced/executed on the recently-auctioned lands by National Textile Corporation Ltd (NTC). But since the developers had to pay huge land price for the lands, it is expected that majority of the supply will be added in the luxury housing and commercial segment.
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As the year 2010 saw the prices are touching the 2007 level in some markets, the analysts say, there is still scope for price correction in some micro market in than range of 10-15% due to oversupply. “Price increase of 10-20% in cities such as Kolkata, Chennai, Bangalore and Pune; along with prices close to or exceeding 2007 levels in the Mumbai and NCR region have collectively resulted in approximately 250 million sq. ft. of unsold residential inventory,” said Sachin Sandhir, MD & Country Head, RICS India.
Agrees Azaz Motiwala, founder & CMD, IKON Marketing Consultants, a research firm based out of Rajkot: “Indian real estate industry may see some down turn in 2011. It may start from 1st quarter of 2011 and last up to 3rd quarter of 2012. However it will be not too intense as it was during recession period. It is expected that price may slash by 10-15% during this phase of correction but under certain situation it may last up to end of 2013 with price correction of 30% specifically in Tier-I cities.”
However, majority of developers we spoke to think price correction may not happen all across but luxury segment may see some correction. “We are quite optimistic and looking forward to the year 2011, since the infrastructure development across Mumbai Metropolitan Region (MMR) has also picked up momentum and are likely to push up demand for housing. As far as prices are concerned, they seem to be stabilising now across all the locations and we don’t think there is any chance of downward movement,” said Mayur R Shah, Managing Director, Marathon Group.
ABIL Group’s Chief Executive Sudhanshu Purohit agrees: “I do not see a further major correction in 2011 apart from what has already happened. The general outlook seems good in the residential sector and especially so in city specific areas.”
On the fund side, banks may become more cautious while lending to real estate players, thanks to recent ‘bribe-for-loan’ incident, which could be reason for some project delays. Funds from equity and debt market may not also come in so easily. As sentiment is low in stock market, the real estate IPO will chose to wait and watch.
AFFORDABLE HOUSING
Affordable housing segment supported by strong demand from Economically Weaker Sector (EWS) and Lower Income Group (LIG) would be the driving force for the industry in 2011 and beyond as 99% of required 26 million homes will be needed by these group. This segment despite holding huge potential was not been able to attract many developers due to various reasons including high input costs such as land price and construction materials. However, majority of developers we spoke to come out very enthusiastic about the segment. “Supply in this segment will increase however good infrastructure is required. Government incentive is most needed for this segment,” said Manoj John, VP, Corporate Planning and Strategy, RNA Corp.
The government’s contribution is highly needed in terms of infrastructure development and making land available in reasonable price to make affordable housing an attractive and viable proposition for developers. There is huge number of projects slated to be launched this year all across India.
“With the Government trying to gather momentum for the category further with the theme – ‘Housing for all’, the real estate industry is expected to soon harness the massive opportunities of scale and scope at the base of the pyramid,” said a recent white paper released by Jones Lang LaSalle India (JLLI).
HOT CITIES
Mumbai
Delhi NCR
Chennai
Kolkata
Bangalore
Pune
Hyderabad
Nagpur
MID HOUSING
Just like affordable housing, there’s going to be strong demand for mid segment backed by middle income group. The segment is expected to attract both the end users and investors. Developers say the demand in this segment will remain robust in the coming years. “The mid segment has always been the leader in the Indian market and will continue to be so. It witnessed growth in 2010 and became a favourite of the home buyers. Even in 2011 it will witness an upswing especially in NCR and Tier II & III cities,” said Ravi Saund, Head Business Development, CHD Developers Ltd.
The houses in the ranges from Rs30-70 lakh in the metro cities is seeing more supply as many project in this range commenced around 2008-2009 will see completion. “With the revival of economy and increased job opportunities mid-housing projects are in the limelight. Demand for the mid-housing segment has seen considerable increase in the last two or three years. We are sure that majority of the demand for the residential housing may come for this segment during the forthcoming period,” said Mayur R Shah, Managing Director, Marathon Group.
HOT CITIES
Mumbai
Delhi-NCR
Chennai
Bangalore
Hyderabad
Pune
Kolkata
Coimbatore
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