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India's Third Giant Leap

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Will there be a pickup in real estate sector?
Thu, 9 May Pre-Open

Property prices across Indian cities have nearly quadrupled in the last decade. But one cannot be pardoned for assuming that the past trend will hold good in future as well.

The real estate sector in India has been plagued with serious problems of late like falling sales, rising construction costs, dampened market sentiment overall, sluggish economic growth, high interest rates, high inflation and poor industrial production (IIP). As a result many leading players in the sector had to sell of their land to reduce debt, private equity players have trimmed their exposure in realty sector and general slowdown in various industries has hit commercial real estate.

According to the latest RICS India Commercial Property Survey, there is more trouble for the sector. The supply of distressed properties within the commercial segment will increase during the second quarter of 2013. A distressed property is defined as a property that is under a foreclosure order or is advertised for sale by its mortgagee. Distressed property usually fetches a price that is well below its market value. An increased rate of distressed properties entering a country's market can be seen as a negative economic indicator while a decrease may signal a recovery. India is expected to witness further increase supply of office properties from developers struggling to fund, complete or sell their projects in the April-June quarter. This continues from a marked pick-up in the supply of such distressed office properties in the January-March period.

However, there are few positive triggers as well, which could lead to the revival of the real estate sector. The government's decision to allow 51% FDI in multi brand retail has cheered both retailing and real estate sectors. From real estate point of view, it will open up multiple opportunities in the medium and long term, as the demand for quality real estate would rise. Having said that real estate will be far from being a safe investment bet for retail investors for a long time to come.

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1 Responses to "Will there be a pickup in real estate sector?"

shiv kumar

May 9, 2013

The real estate sector value is peaked and become unaffordable to common man. The black money from political malpractices are rolling there as the parliment election is nearing that too will not come to real estate
so the value has to come down

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