By: Sumit Bharana, Director, Era Landmarks Ltd.
Track2Realty Exclusive: The real estate clan in the NCR region has come a long way ahead particularly with the housing sector most likely to witness a notable recovery, by the second half of 2013. The rising prices and high interest rates of the RBI have caused a drastic slash in sales. Adverse market dynamics such as high debt, piled up inventory and depressed market conditions took the sector for a rather harsh toll.
There have been situations as complex as realty giants taking to internal accruals for part payments of its market debts, while some developers sold off some of its assets to subsidize their debt situation. At this precarious juncture, a drop in the interest rates could have significantly eased up the debt situation with most of the indebted realty firms and supercharged their stocks as well.
Even though the RBI is unlikely to restructure sector loans, rumors in the market often argue that interest rates are most likely not to witness a significant upsurge.
Rising property prices and high interest rates have deterred genuine buyers from taking decisions. As for the mid-segment housing the options to choose from are limited. This is clear indicator of a disparity between demand and supply.
Additionally, the rising input prices, land prices and borrowing costs has also potentially exerted an enormous pressure on the developers, leading to deferred project deliveries.
Nonetheless, given that the government has ostensibly begun to take proactive measures so as to push the necessary reforms, which is more likely to have a positive impact in the conviction of consumers, a substantial improvement in the buyers’ awaits by mid-2013 with a fair certainty.
Despite the adverse market situation, the region is by and large witnessing a tremendous development. This sort of unaffected market behavior also potentially attributes to the FDI in the Retail Sector. The move will not only help the realty companies ease the vacuum of their inventory, but add more credibility in the eyes of the investors.
Additionally, it will also give a great boost to growth in the commercial and retail sectors. Real estate opportunities in the region have transformed the fate of planned satellite towns of Gurgaon and Noida to high tech dimensions. Both Gurgaon and Noida are now self-sustaining markets constituting to all asset classes: residential, commercial and retail.
Investments pouring in particularly through FDI in retail, opens avenues potentially conducive for an extensive gamut of activities both in the commercial and retail sectors as well.
Residential demand however will continue to prevail strongly, despite being characterized as a speculative market owing to the predominance of investors. Since the circle rates have gone up in the region, official valuation of properties will also rise along with the payable stamp duty. This will further limit the incursion of cash-rich investors into the NCR market, making it less speculative.
The projected infrastructure initiatives will drive the real estate development in the region with unconstrained steadiness.
