Second half of 2014 to fuel growth in real estate

Clarity on new government, rates cuts, corporate spending to trigger growth in the sector

Real estate professionals are unanimous in one prediction: Things will start looking up for the sector only in the

second half of 2014, after the general elections, when clarity on the new government will emerge and

businesses start investing.

2013 was clearly a dull year for real estate, when all asset classes — residential, office and retail properties —

barring some cities such as Bangalore saw a steady decline in absorption.

Residential

Absorption of residential units in most cities such as Mumbai, Delhi-NCR and Pune went down in the first three

quarters of 2013.

PAST AND PRESENT

Things that happened in 2013

Cabinet approves land acquisition bill

Sebi releases draft Real estate investment trust (REITs) guidelines

RBI bans buying property abroad

Things to watch out for in 2014

Developers, owners may get to launch REITs

Government may announce realty regulator

Residential sales may improve, prices may rise

Vacancy rates in office properties to rise

“The year 2013 was a drag for the Indian economy, with poor macroeconomic conditions. Slowing income

growth, sustained weakness in the rupee, sky-rocketing inflation and high borrowing rates combined to make

consumers vary of spending,” said, chairman and country head of realty consultant Jones Lang LaSalle India

(JLL).

Demand analysis of top 7 cities (‘000 units) 2010-14

According to JLL, weighted average prices of homes across the country rose 10 per cent year-on- year during

the first three quarters of 2013. But growth was skewed towards suburban and emerging locations, as opposed

to city sub-markets. Rental values rose eight per cent during the period.

Consumer confidence is expected to remain subdued in first two quarters of 2014 due to uncertainties

surrounding general elections and macro-conditions. “However, after the elections, fence-sitting investors are

likely to become active. The increase in absorption of residential units will help reduce the currently large

inventory holdings of developers,” The official said, adding residential prices are expected to raise 10-12 per

cent during 2014.

“We expect residential to experience traction in terms of sales volume and launches at the start of the second

half of 2014 and there would be an upward pressure on prices. The office segment is driven more by economic

rationale and as a result, the uptick is likely to take place with a quarter lag,” said chairman and managing

director, Knight Frank India.

(courtesy: CNBC, Google, JLL)