Real estate outlook positive for 2017 on back of strong reforms, says CBRE

New Delhi: CBRE South Asia Pvt. Ltd., India’s leading real estate consulting firm, today announced the findings of its Asia Pacific Real Estate Market Outlook 2017 India. As per the report, India continues to hold its position as the world’s fastest growing G-20 economy, on the back of improved investor confidence and better policy reforms. The report is part of a global research series released by CBRE every year, highlighting trends and dynamics across various segments in the real estate sector for the year ahead.

Commenting on the buoyancy of the sector, Anshuman Magazine, Chairman, India and South East Asia, CBRE said: “With 2016 being the year of landmark decisions for the Indian real estate industry, the sector saw concerted efforts by the Government to bring in transparency as well as boost consumer sentiment in the sector, especially in the residential market. The outlook for the year 2017 is positive with an expectancy of steady growth, stability and revival in the market.”

Office Market Outlook

High absorption levels and global investor interest will continue to bring life into India’s office sector. In 2017, the office sector is likely to maintain its momentum with an anticipated absorption of 40 million sq. ft. A strong trend of ‘pre-commitment’ in under constructed buildings while IT/ ITES to continue to be the key demand driver for space across the country. CBRE says that technology to play a key role, even as the occupiers are expected to keep a strong check on space utilization ratios and innovations in workplace strategies, while implementing their expansion plans.

Global occupiers to continue to account for sizable share of leasing activity, however we see a rise in activity from domestic corporates.

Residential Market

India residential supply has jumped up by 70% q-o-q in Q1 2017. Compared to only 18,000 units launched in Q4 2016, we have seen more than 30,000 units launched in Q1 17. The biggest jump was in Chennai, Hyderabad, Kolkata and Bangalore.India housing sales have also jumped up by 70% q-o-q in Q1 2017. Compared to only 14,000 units sold in Q4 2016, we have seen more than 23,000 units sold in Q1 17. Housing sales are expected to revive in 2017 both in primary and secondary market and affordable housing, which is witnessing increased interest from private developers, will emerge as a key driver of housing sales.

Retail Outlook

The year 2017 is likely to be positive for the retail sector which is likely to witness an increased quality supply. Demand for organized retail space will continue to exceed the supply. Consumption patterns are likely to mature due to increasing urbanization with upcoming retail developments to allow entry points for global retailers beyond the traditional epicenters of Delhi NCR and Mumbai. REITs will enable development of better quality malls and discourage strata-sale of properties. Implementation of GST would lead to rationalization of tax at different levels with expected improvement in ease of doing business and movement of retail goods.

Day after RERA, realty stocks surge

Shares of realty and housing finance companies made smart gains by surging up to 9% on the day after the much-awaited Real Estate Regulation Act (RERA) came into force.

From the realty pack, Godrej Properties surged 8.86%, Sobha Ltd gained 6.48%, Indiabulls Real Estate soared 3.74%, Prestige Estates gained 2.33 % and DLF gained 1.80%on the BSE.

Led by gains in these stocks, the BSE realty index rose by 1.99 % to end at 1,962.13. Shares of Indiabulls Housing Finance jumped 5.45%, LIC Housing Finance gained 5.53% and HDFC went up by 2.99%.

“Implementation of RERA will bring financial discipline, transparency, accountability and compliance in the sector. It will improve perception of all stakeholders in the sector. It will lead to improved project efficiency and delivery.

“This, in turn, will lead to attract higher investment and PE funding for the projects. Buyers can expect protection against delay and fraudulent practices and transparency in sales based on carpet area,” said Ajay Jain, executive director of investment banking and additionally head of real estate group, Centrum Capital Ltd. The Real Estate (Regulation & Development) Act, 2016, which seeks to protect home buyers from unscrupulous developers, came into effect from Monday, 1 May. Cleared by Parliament last year, the new realty law would have one regulator in each state for the sector.

It has stringent provisions, including imprisonment for failing to comply with any of the directions of the Act. Only projects with all approvals in place can be sold to customers under the new law. Projects with plot size of a minimum 500 sq.mt. or eight apartments need to be registered with the regulatory authorities.