Real estate: Return of the investor?

  • Timsy Jaipuria, Timsy Jaipuria, New Delhi
  • Updated: Aug 22, 2016 17:02 IST
The investor is making a comeback in the real estate sector, if data is to be believed. (HT Archive)

The investor is making a comeback in the real estate sector, if data is to be believed.

After driving almost 50% of residential unit sales till 2013-14, they virtually vanished from the scene as the real estate sector got into a financial freeze. According to PropTiger India’s Realty Report for 2015-16, the last quarter saw only 3% sales coming from the investors.

But now they are coming back.

Sales from investors inched up to approximately 10% during the April-June quarter of 2016, the same PropTiger report found.

With a revival in the investor interest, the inventory hangover, or the estimated time to sell piled up stock, has also reduced from 38 months during January-March 2016 to 35 months in April-June 2016.

Hinting at a possible growth in the sector, some of the main reasons that have led to the revival of investor interest in realty include competitive, or comfortable levels of pricing, good discounts and bargains, healthy economic indicators along with declining rates of supply and demand in the sector.

“As developers are trying to restore investor confidence, the steady performance of the Indian rupee against major global currencies, moderating repo rate and controlled inflation have given a push to the purchasing power, thereby improving buyer’s affordability. Developers are now more focused towards speedy completion and delivery of projects. Also key for investors is the fact that most of the developers did not increase the prices during 2015-16. They have been coming up with innovative schemes to boost sales. The last financial year saw an increase in consumer activity with a rise in discounts and attractive financing schemes, thus leaving a scope for appreciation in the near future,” said Sunil Mishra, chief business officer, PropTiger.

“The residential market in India is currently witnessing a shift. Fresh launches have slowed down as developers concentrate on reducing existing inventory levels. With developers becoming flexible with payment plans and price points, not just the end users, but the investors have also realised that this is a good time to invest in the market. Anyone looking to invest, whether for end use, or for long-term returns, is taking advantage of this time. Investments in real estate continue to have long-term benefits,” said AS Sivaramakrishnan, head - residential services, CBRE South Asia Pvt Ltd.

Various industry reports have cited that during the first quarter of 2016-17, sales rose by 8% (quarter on quarter) against a fall of 3% in the fourth quarter of 2015-16.

Industry experts say sales are likely to improve in the months to come as the festive season approaches.

Launches also witnessed a quarter-on-quarter rise of 14% in the first quarter of 2016-17 against a fall of 14% in the fourth quarter of 2015-16. Launches had declined to almost zero in the past.

Interestingly, affordable housing segment accounted for more than 50% of the total launches, reflecting the impact of the recent incentives offered by the government to the developers.

Besides, in order to reduce risk, investors are picking developers that are backed with strong corporate integrity, such as Godrej, Lodha, Tata Value Homes, Tata Housing, Prestige, Supertech, Brigade, Kolte Patil, Sobha, Artha, and Mahindra Lifespaces, among others.

Some of the favourite locations for investors, experts say, include emerging localities in the peripheral regions of Gurgaon, some parts of Mumbai, Ahmedabad and Hyderabad, which have recorded significant appreciation and real estate activities in the residential segment. This is primarily due to the low price and bargains available in the market.

“An interesting trend has emerged wherein consumers now prefer to buy real estate projects that belong to established players, which have all the possible features such as strategic location with accessibility to key surrounding areas and facilities. Also, consumers get modern amenities for fulfilling lifestyle aspirations. The biggest advantage of investing in a home developed by an established real estate company is the surety of project delivery and business ethics. This trend is visible in all the segments of the pyramid as the buyers are looking for a strong brand name to back the construction, and also to be assured of quality and reliability. There has been a clear influx of investors for this reason as well,” said Brotin Banerjee, MD and CEO, Tata Housing.

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