Real estate sector likely to be hit hard

Real estate sector likely to be hit hard
26/12/2016 , by , in News/Views

The final quarter of 2016 has bad news for real estate players as the supply of new residential inventories in most metros including Bengaluru has exceeded the absorption rate, showing a slowdown in the industry.

However, Anuj Puri, Chairman and Country Head, JLL India, says, “It is a landmark year for the real estate industry as 2016 saw the biggest changes in decades, especially on the policy front. The policies like implementation of goods and services tax (GST) and the Real Estate Regulation and Development Act will provide the much-needed impetus to this sector.”

Demonetisation caused considerable turmoil but, however, along with the Benami Transactions Act, it promises to bring greater transparency in the real estate sector and will attract more customers as prices will stabilise and end users will have more confidence as most policies will only bolster their confidence in the sector.

Jump in new supplies

The last quarter is expected to witness at least a 20-25 percent jump in residential new supplies across cities. However, capital and rental values are expected to remain more or less stable. High unsold inventory will remain a major problem stalling the growth of the market in top cities. As per the market segmentation, affordable and mid-segment housing are likely to lead the show in the coming quarter as well.

Affordable housing will come into sharper focus now than in previous years, and Real Estate Investment Trust (REITS) promise to open up the real estate market to smaller investors in the coming year. The country’s real estate markets are definitely poised for growth in the medium-to-long term on the back of higher transparency and further consolidation.

“Post-demonetisation, the affordable housing segment will get a much-needed boost. Confined to the fringe areas of metros, this segment is expected to get a boost as land prices will plummet in the next few years, especially in far-flung areas around Indian metros, as well as tier-II and tier III cities. Most agricultural land transactions involved a cash component, which were affected after demonetisation,” said Anuj Puri.


Shrinivas Rao, chief executive officer, Vestian Global Asia-Pacific, said, “The industry is on a path of course correction and there obviously will be a price consolidation in the next few months. But the new policies in place will only boost the confidence of buyers and hence after 16-18 months, buying will resume.”

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