The Indian real estate sector continues with mixed signals
The Indian real estate has been setting new hopes with the new NDA government budget happened in August 2014. Since the Modi government has been giving a focus on infrastructure development and affordable housing, many real estate experts predicted that these are the sunshine days of the Indian real estate sector.
The clarity regarding the taxation of real estate investment and infrastructure trusts now is paving way for liquidity in this segment. The Indian real estate sector is on the upward trend over the last 3 quarters of the year 2014 with an increase from 51-83 in the Ficci-Knight Frank Real Estate Sentiment Index of stakeholders during July-September 2014. The future sentiment is also showing as 71, compared with the 69 in the last quarter. The index value at 50, although neutral, is a sign of increasing optimism in this segment. This survey has been conducting among the supply-side stake holders in India, which includes developers, private equity funds, banks as well as NBFCs.
The report also reveals that even though the RBI has not reduced the policy rates in the current fiscal, there is a 50 basis point reduction in the statutory liquidity ratio, which has eased the banks with liquidity. This availability of funds will be good news for the home loan segment. Some leading banks have also reduced their home loan rates which is a good news for home buyers as well as corporate.
As per RBIs October bulletin, the real estate prices too have moderated as per the recent trends in the House Price Index (HPI) 2013-14, as compared to the steep rise in real estate prices in the last few years. As per the bulletin, house prices were hiked only at 11.4% year-on-year in the fourth quarter of this financial year, as compared to the 19.9% and 25.8% hike in the corresponding quarters of the last two years respectively. This moderation is more visible in the house prices of small and medium categories.
However, homebuyers need to make cautious moves. According to Anuj Puri, Chairman and Country Head of Jones Long LaSalle India, even though the demand of affordable housing remains the same, the market conditions might have decreased the pricing power of several developers, especially those who do not have a very strong holding capacity.
The research report presented by Nomura says that the real estate sector needs to under perform as an asset class in this current environment of hiking interest rates and lowering inflation. Ficci-Knight Frank also suggests that the stakeholders are still in a wait-and-watch mode, analyzing the impact of the sentiments in the coming months. This is a good time for real estate buys, however, it is advised to be diligent before you make a final decision in this regard, as the sector is giving mixed responses.
Source: Live Mint
