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General elections will change the game

Residential real estate to be back on the growth track in the second half of the year

realestate Updated: Jan 06, 2014 17:52 IST
Vandana Ramnani
Vandana Ramnani

For those sitting on the fence to buy property or waiting to sell at a decent profit, the results of next year’s general elections is likely to be a game changer. Realty experts say that while cautious market sentiment will prevail at least till the first half of the new year, the post poll phase will contribute to the revival of the real estate sector that has not been doing well over the years due to political and economic uncertainty, high inflation and the depreciating value of the rupee.

The strong headwinds that the domestic economy has been facing since the last year due to structural issues such as high fiscal and current account deficits, and delay in reforms are expected to remain until the general elections next year. As a result, the first half of the year may maintain status quo but improve thereafter in the second half, says Sanjay Dutt, executive managing director, South Asia, Cushman and Wakefield.

The second half of the year is likely to witness a gradual revival in absorption of residential units. Real estate capital values will also increase in a subdued range of 10% to 12% year-on-year pan-India for the whole year, says Anuj Puri, chairman and country head, Jones Lang LaSalle India.

Post 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.

A recently observed trend of a gradual fall in supply in response to the subdued demand will only reverse with a lag, helping prices to strengthen in the second half. Therefore, pan-India residential real estate prices are likely to go up factoring in input-cost inflation and a gradual pick-up in demand, Puri adds.

The most sought-after properties among buyers will be those that are mid-sized and reasonably priced, offer location advantage and good infrastructure. These will be homes in the `3,500 to `5,500 per sq ft segment.

Select locations may witness healthy activity and get good response from developers, investors and end-users due to ongoing infrastructure developments. Overall residential markets are expected to witness stable capital values, except for those developments that are over leveraged and are not able to attract sales.

Post the elections there will be a lot more clarity from both the political and economic standpoint, adds Rahul Gaur, CMD of Brys Group.

Flash forward 2014

The residential market will see a lot of ready inventory enter the market this year. This means that developers will adopt a cautious approach in terms of new launches. This will also put pressure on rental values

For end-users, there will be many opportunities available both in the primary and the resale market. “One has seen correction in prices, especially for the new supply coming into the market. This has propelled developers to take a cautious approach in terms of pricing,” says Shveta Jain, director, residential services, Cushman and Wakefield.

Prices in the resale market too have rationalised as many investors are looking at exit opportunities

Locations to watch out for

Gurgaon: For end-users, established locations such as Golf Course Extension Road, New Gurgaon and Dwarka Expressway are options to look out for. For investors, areas close to Gurgaon such as Bhiwadi and Neemrana in Rajasthan, have the potential to offer good yields

Noida: Noida Expressway offers residential opportunities for end-users wanting to invest in a fully established and defined corridor that is well connected and has a social infrastructure in place. Greater Noida is a good bet for investors who can wait for another five years as it is perhaps the only planned township in the NCR. Those interested in Yamuna Expressway have to be patient as the Greater Noida market will take off much before Yamuna Expressway. Yamuna Expressway is likely to be a good long term investment option if one can get a `25 lakh affordable ticket size unit in a good location.

Ghaziabad: While Indirapuram is largely a saturated market, Raj Nagar offers good opportunities for end-users due to its location, price point and upcoming infrastructure

First Published: Jan 04, 2014 20:58 IST