Indian economy, facing slowdown for some
time now, is poised for a recovery in 2014, experts and the market trends
suggest. As inflation has come down to around 6%, the RBI and other government
agencies are likely to take progrowth measures to give a fillip to the
economy.
At the same time, the likely revival in the
global economy including that of the US will also provide an upward push
to the growth of Indian economy.
Experts also say that as the country is going
for general election, a strong, stable, and business-friendly leadership
will certainly help the recovery. However, a senior consultant said the
economy has its own dynamics—whichever party forms a government, ultimately,
businessmen will invest to make money if there are opportunities. A business-friendly
government may add to the growth by two to three percentage points over
a non-business friendly government, the consultant said.
Various reports by research firms suggest
that Indian economy is likely to see a high-growth momentum in the second
half of 2014-15. At present, the market is expecting that the RBI will
cut its benchmark interest rate to indicate the softening of lending rates
in the country and provide the required growth momentum to the economy.
All these measures and global economic conditions
will help the real estate sector in the country, too, and it is certain
to register higher growth than it did in the last couple of years.
Om Ahuja, CEO of residential services, Jones
Lang LaSalle India, says: “Considering that sentiments are all set to
improve on the back of increased corporate earnings and a revitalized capital
market, the current sluggishness in property sales can continue for a maximum
of two more quarters. This interim period is crucial for property buyers
and investors, as the currently available deals and offers will continue
for this period. The basis for this prediction is not conjecture, but the
visible presence of economic factors that drive growth in the real estate
sector. From this point onwards, the clock is ticking and the countdown
has begun.”
Property prices, contrary to the general
perception, are not likely to fall—in fact, prices have not fallen in
the last one year very appreciably despite slowdown in the sector. Therefore,
experts suggest that that those who want to buy their dream home should
not wait for prices to fall. It is better that they enter the market now
and avail the current discounts that developers are offering owing to the
slowdown in the sector.
Ahuja said that over the last few months,
many research and media reports have spoken of excessive real estate supply
and sluggish demand across many Indian cities. In such an environment,
developers roll out discounts and extras that are not part of normal offers.
Despite sporadic incidence of such offers in some cities and locations,
this trend is by no means a common one; it is limited to developers who
are struggling to attract demand, Ahuja says.
More pertinent to real estate is the fact
that once the positive sentiment gathers forward momentum, fencesitters
will rush to buy apartments, Ahuja says. This will be a key trend to watch,
especially in cities that are directly catering to these sectors—specifically
Chennai, Bangalore, Hyderabad, Pune, and Gurgaon.
Evidently, looking at the macro picture is
becoming crucial when it comes to property investments. With exports-led
sectors set to flourish in the improving economic climate, further fuelled
by the agriculture sector’s revival on the heels of an excellent monsoon
in 2013, a pick-up in the GDP’s growth by the third quarter of 2014 is
definitely on the cards. The multiple measures taken by the central and
state governments as well as the RBI to contain inflation will further
improve market sentiments, Ahuja says.
As the global economy has started looking
up, foreign investors are also returning to the market. Anuj Puri, chairman
and country head of Jones Lang LaSalle India, says that despite the challenges,
foreign investors remain interested in India because the fundamental growth
story remains intact. He said recent investment from major international
funds strengthens that hope.
US group Blackstone has invested $1.7billion
in equity capital in India in recent years. Canada Pension Plan Investment
Board (CPPIB), the $181 billion Canadian pension fund, announced its first
venture into Indian real estate in December, describing it as a “key growth
market”, Puri says.
CPPIB committed $200 million to an office
joint investment. However, it is still to be seen whether others will follow
suit.
Puri also has America in his sights due to
one simple fact: every year, since 2005, American companies have leased
more real estate space in India than domestic companies. Outsourcing has
fuelled that trend and Puri is keen to get a sense of the strength of the
US economic recovery and whether it will drive new demand in India.
“One of our major US clients called me last
week to say they were doubling the number of new jobs in India to more
than 25,000 off the back of new business coming their way in the United
States,” Puri said. In the backdrop of these indicators, experts say that
the reseal estate sector is likely see a good recovery in 2014-15.
Source - TOI
