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Global economic outlook & state policies to affect realty

Posted on by Track2Realty

By: Mohit Goel, CEO, Omaxe

Mohit Goel, CEO, Omaxe, Indian real estate news, India realty news, India property market, Track2Media, Track2RealtyTrack2Realty Exclusive: 2014 is the year when, to some extent, not only the real estate market but the economy as a whole will have the impact of being in an election year. This is because real estate gets affected as approvals get delayed during this time. A couple of months before even the State elections, slowdown in deals happens on which new approvals are pending.

But what should be a matter of concern for the sector in the year ahead is the global economic outlook and policies at the state level. Of course, some of the funding challenges can be addressed at the Centre only, for instance the REIT being made operational.

I don’t think it would be fair to call a slowdown due to policy paralysis in the election year, as real estate is by and large a state governed issue. But yes, very close to the announcement of election schedule the investor sentiments are generally guided by bearish outlook, and hence there is postponement of purchasing decisions. Also, the new launches are relatively lesser as developers are forced to go slow due to delays in approvals.

Having said this, what I feel is that most of the political activities are centred on metro cities, the market dynamics are different in different cities and it is up to the developers to explore the markets that will outperform other markets in these uncertain times. In most of the tier-II and III cities the situation is different as the stability of state government in that particular state impacts the sector. After all, land and housing policy is largely state regulated.

This is an election year and 2014 looks good as sentiments are expected to pick up. Of course, there are challenges all around at the moment. The present scenario may pose complex issues of liquidity, subdued confidence, high rates, political and economic uncertainty. However, in 2014 a lot of these may improve with global economy getting better. At the company level, we are also confident of 8-10 million sq. ft. of delivery in 2014.

It is about looking at the brighter side of the business in the year. As against the perception that 2013 was a very wasteful year from real estate point of view, I feel it has been a satisfactory year. For us, new launches continued in cities like Lucknow, New Chandigarh, Sonepat, Bahadurgarh, Bhiwadi etc and the demand has been good, too. Deliveries are also on the right course.

Going ahead, the stability of the next government is a matter of concern to all of us. Realty estate can not be different from outlook of other business. Unstable government scares not only developers but economy and foreign investors alike. Like every country, India too wishes for a stable and proactive government that not only facilitates in the growth of Indian and foreign companies but also on the development of its people.

But what I am more concerned about is the global economic outlook which is expected to improve, which will nullify the effect to the market across the country. The global outlook has fairly shown resilience and it is up to the RBI to calibrate its policy response to avoid any adverse impact of withdrawal of Quantitative Easing. Though there is a general perception that challenges at the macro-economic level only affects the commercial realty, the fact of the matter is that any impact of macro-economy on either residential or commercial is state and infrastructure specific and depends largely on how its dependent sector is impacted.

Not that there has not been any gains in the year 2013. As a matter of fact, some of the gains in the year have been significant and long lasting. In terms of residential space in tier II and III cities, there has been a marked improvement in demand. This shows a silver lining and developers have now begun to shift focus and work aggressively and assertively in these cities. The Land Acquisition Bill, which will soon be notified; along with Real Estate Regulator will bring in transparency. 

Now, it is up to the new government in 2014 to take measures to revive the economy and the sector. Reiterating on the unrelenting demand of the sector, real estate’s contribution to the economy must be recognized. It remains the second largest employment generator and its share in GDP is also substantial. We, of course, are contributor and not liability to the Indian economy. If given the due support, real estate can emerge as a significant driver of the Indian GDP.

The India Inc in general and the realty sector in particular is keeping its fingers crossed at the moment. We wish that the new government must aim at easing policies to aid the growth of the sector and encourage developers to take up affordable housing which is the need of the hour. With rising income, growing population and urbanization, the demand-supply gap in housing will only widen if the issue is not addressed now.

Key Bills like Land Acquisition and Real Estate Bill are move in the right direction towards ushering transparency, but the end result is ultimately an increase in the price of homes. Grant of industry status is the immediate need of the sector. Foreign investment must be encouraged and banks and financial institutions must be given the elbow room to lend more to the real estate sector.

REIT also is a step in the right direction and it is to be seen how soon it is made operational. So, it is going to be an interesting year and post the General Elections there will be lot more clarity in the market in terms of policies & practices. More importantly, it will uplift the market sentiment which is a key indicator of demand drivers getting activated.