Circa 2007 – a flush of foreign funds, a plethora of high-end housing units,mega malls – all fuelled the realty boom. The bull run completely ignored the middle class end user who craved for a house he could afford, forcing him to sit on the fence till the natural laws of economics worked in his favour. The exclusive growth in the sector could not be sustained in the wake of the economic slowdown and within a span of few months the demand and supply mismatch came to the fore, forcing developers to redesign their product mix and price band. The second rush of blood is likely to see a stable, realistic and a mature realty market emerging in the next two years – circa 2012.
If the recent spate of new project launches in the affordable category and a cautious approach of investors are anything to go by, gazing into the crystal ball reveals the following truths confronting the real ty sector in 2012 – a movement towards a landscape where supply will be aligned to prevalent demand, a significant supply of affordable housing in the range Rs 10 lakh-Rs 40 lakh, a capital appreciation of 10-15 per cent, a distinctive shift to Tier II and Tier III cities and emergence of new townships and business models.
With new launches in the affordable category up for delivery in 2012, realty experts see the real estate growth story bouncing back at realistic levels.
Many see the year 2012 as a “watershed” year in that sense. The sentiment is likely to turn euphoric (subject to the state of the economy) and would be a lot more “controlled” and certainly not “speculative”.
Beginning of the thaw The thaw is just beginning to set in. Affordable housing seems to be the flavour of the year and accounts for around 90 per cent of the new projects being launched. Those sitting on the fence are now faced with the changing product mix and price points and are more eager to get off the fence than before. The going is good and will only get better.
“In 2012 the demand supply will be in line. About 60-70 per cent of the new launches this year will be up for delivery by then. A healthy and mature market will emerge. Not only would new locations come up but benchmark pricing of these locations too would have been established bythen,” says Pankaj Renjhen, Managing Director (North), Jones Lang LaSalle Meghraj.
The recent project launches in the affordable housing segment amidst existing liquidity problems, gives a sense that things are starting to look up for the sector. Prima facie, the product mix, unit specs and price bands,which developers are introducing, all seem right and attractive for the buyers, points out Sachin Sandhir, Managing Director and country head, RICS.
“I do believe that India’s growth story would continue and a large part of this would be attributed to the growth in the real estate and infrastructure sectors and the painful lessons learnt over the last 12 months,” he adds.
A very different real estate market,belonging to the buyer, is taking shape. Developers chasing high margins have realised that even though the margins in this segment are low, this is where the demand coupled with scope for volume business lies. From speculative investor activity resulting in sky-high prices, the focus is shifting towards innovation in construction practices. The recent launches provide hope for the Indian real estate’s growth story bouncing back, he says.
“The market would be more stable and mature by 2012, and a structure and standard will be put in place in the sector. Planned townships will be the order of the day.” A turning point The consumer today is even willing to disregard the promise of timely construction thanks to the “good price and a good opportunity” on offer. If projects are completed on time and the economy remains stable, the year 2012 may see a capital appreciation of 10-15 per cent.The entire perspective of real estate will shift from Tier I to Tier II and Tier III cities.For every rupee invested in Tier II or III cities, there may be a 10-15 per cent gain, he points out. Also, developers who doled out aspirational products during the boom phase and believed in creating demand for them, today are tirelessly looking at catering to the right demand as opposed to creating it.
Says Shweta Jain, head (residential) at Cushman and Wakefield, a property advisory firm, this year will see more such launches taking place. As far as appreciation is concerned,one can hope for a 10-15 per cent appreciation year on year.The year 2012 may see the mismatch between supply and demand getting reduced.
The trend of new launches will continue till Diwali. This will create a new breed of homebuyers who will finally acquire a house after years of waiting and a class of realty players who will only cater to affordable housing, says Vineet K Singh, Head, residential, 99 acres.
The challenges While there is no denying that there is immense shortage of low cost houses, India’s ‘herd’ mentality is a little worrisome. The pace at which projects are being launched makes one wonder if enough research has been carried before launching a project in a particular location, with regard to exact demand and at what price.
The above trend clearly seems to be an endeavour on the part of developers to ensure that they address the opportunity that the affordable housing segment throws open which somehow was missed in the last boom cycle.The only possible downside to the affordable housing strategy will be the developer’s execution capabilities in being able to meet their commitment of providing houses at the promised price and more importantly, the scheduled time. All in all, the next few years augur well for the real estate sector and the development community,as the end user is back in business and the customer is king once again!.
With most of the new launches in the affordable category up for
delivery in 2012, the year will see the real estate growth story
bouncing back to realistic levels.
