How Will The Real Estate Market Look Like In 2016?

The Indian real estate market has been treading the slugging path for the last two years. There has been no recovery in buyers’ sentiment as prices remain stable, and there is less hope of capital appreciation in the short-term.

In 2016, however, most of these factors will turn positive reversing buyers’ as well as developers’ sentiments. Here’s a glimpse of how the Indian real estate market in 2016 will look like:

Lowered Interest Rates: The Reserve Bank of India (RBI) has cut interest rates by 50 basis points in two rounds this year. Though the transfer of benefit by banks to their customers is much slower than expected, a few commercial banks are cutting interest rates for home loan seekers, giving the much needed boost to the sector. The positive effects of these cuts will become much more visible for the property for sale in India by the next year as those who are waiting for much deeper cuts will stop doing so and seal the deals.

Easy Payment Plans: Developers too are changing track to attract buyers into the residential markets. Builders with large debts and piling inventories are expected to ease the process of property investment with easy payment plans for homes. The prevalence of these schemes will help pick up buying properties in many cities as well as towns.

Tier II, Tier III Cities Rise: The property in India has witnessed large unsold inventories, a majority of which is in Tier I cities including Mumbai, Delhi, Hyderabad, Ahmedabad and Bangalore. This has prompted most of the developers, both big and small, to head to other upcoming tier II cities like Pune and Chennai where there is higher chance of capital appreciation along with the rising demand for luxury and semi-luxury apartments.

Other Tier II cities, like Indore, Chandigarh, Lucknow, Jaipur, Kochi, Coimbatore and Visakhapatnam, too are experiencing growth. The developments in these towns will be the biggest focus of the developers in 2016.

More Affordable Units: The change has already happened. A large number of developers are re-drawing their plans to converting 2BHK apartments into 1BHK apartments in India with fewer and simpler amenities. This will end the exclusive growth of luxury condominiums only in all the new locations, creating only posh localities out of most real estate hubs.

Increased FDI in Realty: The government is planning 100 smart cities across India and other such projects similar to the GIFT city in Gujarat. These projects have already garnered huge interest in the NRI and other communities. The government has also made it easier for foreign direct investment (FDI) to flow in to Smart City projects. Such kind of money, in the form of private equity or seed funding, is expected to boost investment in the affordable segment, which will lead to growth in the real estate sector.

The sector has been slow for a very long time now. With enough boost from the government, this state of affairs is all set to change in 2016.

Source: Proptiger.Com


PE investments in Indian realty starting a new phase

Private equity investments in Indian real estate is starting a new phase, says JLL India.

In its report ‘Real Estate Private Equity 3.0’, JLL India said “We believe so; the PE investment community has learned from the past and has improved, and the possibility of them focusing on higher returns at the cost of risk again is unlikely.

“If the Indian Government, which has generated a lot of hope, works on the right path and delivers what it promised, the industry will have patience and will move positively,” it added.

Anuj Puri, Chairman & Country Head, JLL India said, “There has been a clear increase of focus among investors about where they want to invest their funds. During 2007-08, investors left no stone unturned to participate in India’s economy and real estate growth story, and invested across all possible asset classes. In the same period, 66 per cent of funds were diversified.”

“The share of such funds has reduced to negligible levels, post-2014. In contrast, residential-focused funds have increased to 85 per cent today from the then measly figure of 14 per cent. These two trends show that the investment approach of investors has changed from weighing every asset class on the opportunity it presented to becoming residential-focused, as this asset class has given maximum returns over the years.”

Source: CredaiNCR.Org

Hope swells in Sector

Real estate investment forecast indicates improvement due to government stimulus.

The fundamentals are in place for the global economy to move ahead in 2015.

Experts are of the view that the signs for market recover are clear and present.

“I anticipate better news ahead for India’s realty sector, which, however, will take time to recover,“ Anshuman Magazine, CMD (South Asia) of CB Richard Ellis (CBRE), says.

Magazine tots up the factors most likely to impact the real estate market positively: stronger and sustained GDP growth; more relevant reforms like the recent amendments to the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013; and the paring of interest rates.

The outlook for capital markets in the sector continues to look affirmative and transaction activity is expected to improve in forth coming quarters. With the government’s reform agenda beginning to build momentum, Magazine expects India to start 2015 on a brighter note than it did the previous year.

In line with the expectations of a gradual market recovery in 2014, the economy, Magazine said, bounced back with growth rates above 5%. By the end of the year, inflation too fell to multi-year lows. Consequently, there is optimism in the market about a stronger economy, and expectations of the government ushering in reforms.

This year’s real estate investment forecast also indicates an improvement due to government stimulus efforts. Institutional investments and capital market transactions in the realty market during the year stood at approximately $5 billion. Of this, land and development stage transactions attracted the highest investments from domestic as well as foreign entities, indicating significant investment in greenfield and brownfield development, Magazine said.

Anuj Puri, chairman and country head of a Jones Lang LaSalle (JLL) India, says that with the improvement in the business environment in the country, MNCs that were hesitant to enter the Indian market because of uninspiring political environment earlier are now dusting off their plans for India and getting their entry vehicles back in gear.

Year 2015 will definitely be a good year for the real estate sector on three counts: The threat of inflation has completely submerged, and borrowing rates are sure to go down from the current levels. Economic activity is picking up, and the RBI anticipates GDP growth to reach 6.5% yy in 2015-16. Corporate India will be hiring big to help cope with rising business activity. Market re-orienting with developers now largely focusing on affordable homes, which will bridge demand-supply gap.

Real Vibes:
MNCs that were hesitant to enter the Indian market because of uninspiring political environment earlier are now dusting off their plans for India and getting their entry vehicles back in gear.

Source: Times Property, Jan 10, 2015

HOME LAND – How to invest in Swadesh

NRIs wishing to benefit from the appreciation in Indian realty should exercise due diligence in their quest.

As the winter holidays begin, a large number of non-resident Indians (NRIs) visit India–some to meet their relatives and others to find grooms or brides for their grown-up children.

Nowadays, another important objective they have in mind during their trip is to buy real estate in India. Here, we look at some of the crucial points NRIs must pay heed while making such purchase.

Why NRIs Invest in India:
Many NRIs, especially those living in the Middle East, don’t intend to retire there. They plan to return to India and settle down in their home country after retirement.With this objective in mind, many of them invest in residential real estate in India while still working abroad.

Many NRIs have relatives–old parents or brothers and sisters–in India. Sometimes they buy residential real estate for their use.

Nowadays, a growing reason for buying real estate is that they want to invest in Indian realty. The high returns from real estate in the previous decade though not in the past couple of years-has attracted many to invest in destinations like Gurgaon, Bangalore, Pune, etc.

Finally, Indians – both resident and non-resident are comfortable investing in physical assets and real estate ranks high in their list of preferred investments.

A large portion of the NRI population comes from states like Punjab and Kerala, where land has traditionally been a much-coveted investment option.

Will Returns be High?
Over the last 10 years, the returns from real estate have been significantly higher than the average over the past 30-40 years. The theory of mean reversion applies as much to real estate as to any other asset class.

According to this theory, the long-term returns of all asset classes converge towards a mean or average level. Hence, asset classes that have done well in the past are unlikely to give as high returns in the future.

Going by this theory, the returns from real estate may not be as high in the near to medium term as they have been in the past 10 years or so.

A study done by real estate consultancy Liases Foras found that the level of inventory available in most of the top cities of the country is very high now. The consultancy concluded that prices may not move up rapidly in most of the country’s top cities for at least a year and a half due to this.

At the same time, one must keep in mind that India is urbanizing rapidly. Every year lakhs of people move from villages to cities, creating demand for real estate in urban centers.

Therefore, the returns from real estate will not be all that poor either. However, NRI investors will have to be patient and have an investment horizon of 5 years or more.

Exchange-Rate Risk:
NRIs should also be aware that the movement of the exchange rate will have a bearing on their ultimate investment return. Suppose that a US-based NRI invests in India and in 5 years the value of his property appreciates by 30%. But if over this period the Indian rupee depreciates in value against the dollar, it could significantly erode the NRI’s gains.

Understand the Laws:
NRIs investing in India should understand the laws that govern their investments in India. There are, for instance, restrictions on how soon the profits from a real estate transaction can be repatriated.

NRIs also need to understand the taxation framework. In case of some countries, there could be double taxation of gains. “Only those with the wherewithal to tackle these ground-level issues should invest in Indian real estate. Those who don’t have relatives or friends in India to run errands for them may find the entire experience difficult to manage,“ says Vishal Dhawan, chief financial planner at Mumbai-based firm.

The NRI should also check how many banks are lending to buyers in the project. At least 4-5 banks should be lending. If all these banks have done their due diligence, all the papers and permissions of the builder are likely to be in place.

Finally, NRIs should not get swayed by what has been said on the builder’s website. “Many small and mid-level builders have developed glossy websites where they make exaggerated claims. The pictures posted on these web sites are not real. The NRI should get the builder’s claims verified by either visiting the site or getting someone to do it for them,“ Sharma says.

Fast Fact: High returns from real estate in the previous decade though not in the past couple of years has attracted many to invest in destinations like Gurgaon, Bangalore, Pune, etc.

High Point:
1.) Many NRIs, especially those in Middle East, don’t plan to retire there.0
2.) They intend to return and settle down in India after retirement; so many of them invest in residential real estate here.

Source: Times property, Dec 27, 2014