Monday, 24 October 2016

Current Scenario of Real Estate in India

Current Scenario of Real Estate in India

With the year 2016 approaching towards an end, we look forward to the New Year and revisit the Real Estate developments and the changing trends in the industry. It makes a lot of sense to revisit all the developments that have happened so far in this sector and how it will impact the coming year of 2017 for Real Estate Growth.

India’s Real Estate Sector is the second largest employer after agriculture and is expected to gain its reputation after the implementation of RERA in each state. It has been gathered that the real estate sector will generate revenues worth US$ 180 billion by 2020 as against US$ 66.8 billion in 2010-11. The real estate industry has evolved over the past decade and have moved towards being a more mature and organized industry. It is moving towards a direction where we are having global investors amongst others seeing the long-term potential as our economy is amongst the fastest growing economies in the world. With a lot of action and regulatory changes, the industry has a mixed reaction but I feel that the year 2017 will be positive for the investment purposes.

Speaking specifically of the year 2016, the secondary market had been booming at a good pace. As a matter of fact, the last two years were more of a policy formation and adjustment phases starting from the supply to the demand phase. As per the industry experts, the market is slow but this slowdown in Real Estate is not an indication of problem, rather it’s a return of normal market rates and a more balanced and mature market. With a majority of home buyers between an age group of 28-35, the changing economic conditions of the country will surely add to consumers’ wallets and allow them to either make the purchase of their first home or upgrade to a new one. The trends like smart cities, green cities, high rise cities, affordable housing etc are attracting a lot of investors and developers to cater to the these buyers. With the upcoming RERA guidelines this is playing a very crucial role in making the developers serious with their delivery timelines. The developers are not trying to put their act together and be RERA compliance and avoid any penalties and fines. Also, with the history of all the undelivered projects in the past, there is now a lot of demand for ready to move in properties and projects nearing completion.

Moreover, the residential market is moving towards the realistic pricing and is attracting the end users who were sitting on the fence to take a decision in buying a property. For them this is the best time to buy Real Estate.  We suggest that don’t expect exorbitant returns in the present scenario but a decent upward graph will be seen in the Real estate prices starting 2017. Investor sentiments are still not that great but it is bound to revive in the coming year 2017. With the real estate regulatory amendments; credibility and positivity is building up confidence in the minds of investors who will sooner or later get drawn back into the market.

According to data released by Department of Industrial Policy and Promotion (DIPP), the construction development sector in India has received Foreign Direct Investment (FDI) equity inflows to the tune of US$ 24.19 billion in the period April 2000-March 2016. The central government is expected to execute a slew of big ticket economic reforms over the next 2 years as it strengthens its presence. Ease of Doing business, freedom to operate 24 / 7 - The central government is taking numerous steps towards cutting red-tape which has delivered positive results.

In 2016, office space demand was mainly driven by IT/ ITeS, e-commerce, start-ups and large consulting firms.   As per the research surveys by research companies, Commercial market remained strong in Q2 2016 with 10.4 million sq ft of office absorption totaling to about 19.2 million sq ft YTD. The demand was well supplemented by the new supply and existing vacant stock, but vacancy levels have gone down in most of the cities due to limited addition of new supply.
The central government took fresh steps to boost foreign direct investments (FDI) in real estate. Several clauses governing entry and exit of foreign investors were relaxed or removed. Several steps have been undertaken by the central government over the last 2-3 years which have helped enhance investment inflow in the country. As per industry data- Foreign Direct Investment (FDI) inflow in the country increased by 29.32% compared to previous year and stood at $40 Billion for FY 2016. The FDI stood at $30.9 Billion for the same period, previous fiscal. Foreign Direct Investment (FDI) inflow in the country increased by 29.32% compared to previous year and stood at $40 Billion for FY 2016. Private equity inflows in the real estate sector rose 33 per cent to Rs. 5,193 crore in the first half of 2016 on an improved investment climate following reforms like the real estate regulatory law, easing of FDI rules and introduction of real estate investment trusts (REITs), according to property consultant. The Indian real estate sector has witnessed high growth in recent times with the rise in demand for office as well as residential spaces.

With the Union Budget, I am sure that the Government is affirmed and committed towards affordable housing and real estate sector by the announcement by RBI on the repo rate cut immediately after the Budget announcement. This cut in home loan interest rates is very beneficial and one of the most effective way of boosting property sales. With it helping more individuals with lower – middle income group to buy their own homes, this will also help to offset the slump faced by the real estate sector. With a lot of initiatives being taken by the central government to boom the Real Estate market, I am sure that with the cash flows in and out of the country the market will get impacted positively. Currently Real Estate is in a mid phase of policy formation and implementation. The need of the hour is to move towards a corrective side where there are realistic rates with realistic transactions taking place. To conclude, the sentiments of the domestic market in buying and selling of Real Estate has changed over a period of time and looking at the current trends we expect a huge turnover in Real Estate transactions by 2017.


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