The prospects of a stable government at the centre have given rise to improved outlook for the real estate sector in India.
Narendra Modi-led Bharatiya Janata Party swept away the 2014 general elections with a thumping majority. Markets reacted almost immediately, with Sensex jumping by 2000 points during the early morning trading on 17 May – the day election results were declared.
The real estate sector of the country has welcomed the results of a majority-led government which comes into power almost after two decades of various coalition governments.
The global economic recession, and uncertainty of unstable government, had crippled India’s real estate sector for rental as well as sale of property.
Property prices reduced by as much as 8% in the country’s capital region – Delhi-NCR – during 2013, compared 2012, reported property website 99acres.com.
Even average rentals for 3BHK flats reduced by 6% cent during the fourth quarter of 2013 against the previous quarter. Rentals have fallen by 7% during 2013.
However, the real estate industry has high hopes from the new prime minister, and expects better legislation to improve the sector.
“There were a few bills that were standing on the verge of a decision which now will definitely form and parallel we will see new laws been formed that will allow a smoother flow of work in the sector at all levels,” says Kamal Batra, chairman of Buniyaad, one of the leading property brokers in India.
“The election period had paused the market for a bit for the investors; which now will change significantly. The end user market on the other hand will keep on flourishing as the demand increases and interest rates drop.”
The property market would also like to see regulations being streamlined for the construction industry.
“In particular, NCR’s real estate market will benefit from fast-tracked approvals for new projects, which will increase supply and in turn keep the city’s property rates rational,” says Pankaj Kumar Jain, Director, K World Group.
Housing affordability and social housing will be the focus for the new government. “The BJP is in now in a position to boost affordable and mid-income housing projects, which would have positive ramifications for a city like Ghaziabad and NCR,” says Pankaj.
However, Kushagr Ansal of Ansal Housing doesn’t expect any change in the market for property buyers. “The market for end user was neither affected earlier nor will it get affected now. It is just that the demand will increase at a macro level.”
Many builders continue to be extremely bullish about the real estate market in India, and buying property in India is likely to get more expensive. “Real estate sector has grown despite the gloomy economy situation and projected to grow exponentially,” says Suninder Sandha, Director, Horizon Concepts.
“Indian residential real estate price is poised to grow at a 10-12% over next year. There is a paradigm shift towards commercial sector too and with more bank loans available at a good rate coupled with leasing options the demand among investors has gone sky high.”
However, no government has a magic wand which can solve all problems at once, says Anuj Puri of JLL India.
“Reforming the economy is a gradual process, and we need to be patient. A stable government at the centre has potential to boost the sentiments and in return, attract foreign money.
“However, we cannot expect property prices to display the kind of sharp upward movement that were achieved before the Global Financial Crisis. Any such movement – or reduction in cap rate – is, as we believe, at least 12-18 months away.”