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The Future Of Indian Real Estate Market



The Future Of Indian Real Estate Market

It won’t be wrong to say that the performance of the Indian real estate market in the short to medium term has not been that encouraging. There have been some significant changes in terms of regulations, currency issues and as a result the market is taking time to adjust to the situation. However, despite the mismatch between demand and supply, there are enough reasons to hope for a better future in the sector.

Recovery of real estate stock market

In a major announcement by the Reserve Bank of India in regards to its monetary policy took the market by surprise. Now, banks are also allowed to invest in Real Estate Investment Trusts (REITs). This will not only boost the income in the sector but will also improve liquidity. The implications were felt in the stock market, the BSE Realty index which covers the real estate sector on the Indian stock market bounced by 2%. Although this may not seem as a huge boost but keeping in mind the recent situation of the industry, this can be viewed as a positive sign. If we look at the situation earlier this year, the stock market of real estate sector has seen an impressive return of 33% on the back of recovery hopes.

Changes In The Policy

The recent policy changes made by the Indian government have made a significant impact on the real estate sector amongst mixed sentiments from investors. Many investors are holding back their new stocks from releasing in the market, as they still feel that these policy changes are yet to be implemented properly. As per recent reports, less than 5% of unsold units in the market are ready for possession. While it might take some time to clear the unsold stock, it is unlikely that developers will take on new projects for developments.

How soon can we expect the recovery?

The Real Estate Regulatory Authority (RERA), introduced by the Indian government has been seen as a welcome movie, but there are a lot of changes which is still happening in the Act. It is not only taking a lot of time but also raises the question, as to how much longer will it take to finalize everything, as there is a history of delays across the Indian regulatory sector. But because of some bold moves have been made already, there is hope that the recent regulatory changes will bring in some positive results.

One of the major issues that need to be addressed is the fall in the real estate net revenues. The net revenue was reduced by more than 30% over the two year period to December 2016, the interest rate costs percentage of total revenue also went up from 17.81% to 21.54%. So, most of the company funds were used to cover interest payment as a result there was less for investments and every day costs.

The last couple of years have not been that fruitful for the Indian real estate market for numerous reasons but situation is definitely improving and there are sufficient reasons to be optimistic. The need of the hour is to sell the unsold stock as soon as possible while maintaining complete transparency.

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