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Real Estate 2015: The Year of Slowdown or Consolidation?

Real Estate 2015: The Year of Slowdown or Consolidation?


  • From Hero of the Economy to a Mere Spectator

Real Estate, once one of the most lucrative sectors for developers and investors witnessed the biggest setback when economy hit a slowdown in year 2008-09.  The next 42 months again brought some respite to the sector; investors and buyers both returned to the market. However since the third quarter of 2013-14, the market has been reeling under sluggish demand as investors and buyers stayed away from the market. It is said that the real estate sector is again going through a slowdown.

Currently India has a shortage of around 20 million housing units to fulfill its dream of housing for all by the year 2022. On the contrary, as per a report by JLL there is around 4,30,000 units of inventories lying vacant with the developers at the end of third quarter of this financial year. There are almost 1,80,000 units of inventory lying vacant in NCR market alone. It is thus, evident that there is a demand in the market and there are ample inventories available to fulfill that demand, still there is eventually no deal happening in the market. The sector is apparently witnessing a slowdown! Or is it a blessing in disguise for the market. Are the unwanted elements eventually leaving the market? Are the actual buyers going to get benefitted out of all these? Is the market in a consolidation phase!

  • Has Anything Changed?

As per a report by Knight Frank, from January to June this year almost 14,000 units got sold out in Delhi NCR, one of the largest real estate markets of India. This is 50% less as compared to same period last year. The average ticket size remained around Rs 4000 per Sq Ft.  Out of these, around 90% deals involved the actual buyers. There used to be scenarios in year 2007 and earlier when the project used to get sold out in the first few hours of its launch.  The investors then used to cartelize prices and the project after some time. The developers then used to launch the second phase of the same project at revised price. This was a win-win for both investors and the developers.  This procedure pushed prices beyond common buyers’ reach. It is due to this reason market is witnessing the missing link between demand and supply. As investors are least attracted towards real estate due to various reasons, developers are forced to redraft their marketing strategies and come up with lucrative schemes for actual buyers. However, these are just the seasonal gimmicks and will not remain impactful in long run. Thus, marketers need to derive a long term strategy for the actual home buyers to bring them out in the market. It was an investors market then; it is now gradually becoming a buyers’ market now. Indeed, this is a good sign for the sector altogether.

The windfall in real estate attracted many companies who were looking to reap the benefits without putting in much effort. Hundreds of companies mushroomed overnight who launched thousands of projects and sold them in fortnight’s time. Without any experience of construction and dependence on market for funds made these companies inevitable to flop. Today there are hundreds of projects stuck in transit, either at approval stage of at construction stage due to lack of funds. Along with them struck are hopes of thousands of buyers. Many companies has surrendered their projects and wound up their operations in last few quarters stating their incapability to execute. Blessing in disguise, today only those players are now operating in the market that have deep pockets and vast experience. The days of fly-by-night companies are over.

  • Is It a Silver Lining?

Real estate has always been looked with suspicion. There has always been a hint of doubt in every buyer’s mind before putting in any deal. Transparency has always been a problem for this sector. Thanks to the Real Estate Regulatory Bill which has finally got go ahead from the Cabinet Committee and would soon become a law. It would allow formation of Real Estate Regulatory Authority which would look after any and every discrepancy in the sector. Developers and dealers both would have to register themselves and perform as per the set guidelines. Every developer would have to maintain 70% of the project fund in an escrow account to assure timely completion and delivery of the project. These measures would certainly help the sector gain buyers’ faith.

  • The Sector on Consolidation

Year 2015 brought on plate many ups and downs for real estate sector. The first half witnessed a paradoxical situation where no deal is happening even though there is an adequate demand and supply in the market. Investors cut themselves off from the market. Then came the festive season and the biggest surprise came from Reserve Bank of India which cut its rates by an unexpected 50bps setting a perfect start to the season. Developers too gathered their momentum and offered lucrative schemes to lure buyers. Eventually, affordable projects saw good traction and buyers preferred in parking in their money in government run affordable housing projects. These projects assured timely delivery and are available at a price as low as Rs 14 lakhs and Rs 23 lakhs for 1 and 2 BHK respectively.

Overall, these developments would soon start showing their effects and would benefit the sector as a whole.  Real estate, thus is trying to come out of its shell and establish its own credentials in the economy. It is kicking away all the evils and shaping up to take off never to look back. Indeed, the real estate in India is going through a consolidation phase and is certainly going to bounce back with flying colours.

This article has been provided by Mr. Santosh Sinha a real estate communication enthusiast 


About Santosh Sinha 

A communication professional with more than 8 years of experience in real estate domain, Santosh Sinha has observed minutely every move of the sector so far. A strategist by profession, a writer by nature, Santosh Sinha loves to pen his thoughts, thereby allowing his readers to understand the nitty-gritties of Real Estate and get benefited out of it.

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