India's real estate market is likely to see $7 billion worth investments in the current year with that figure rising to $10 billion by 2020, according to real estate consulting firm CBRE. Demand is likely to be driven by limited quality commercial real estate supply on the one side and growth in the affordable housing segment on the other.
“The quality of capital available for investment is improving. On the equity side, more institutional players like foreign funds, pension funds and private equity investors are looking to participate willing to take a longer term view on the sector. Even on the debt side, we see longer duration cycles, flexible repayment schedules and the cost of the debt as such has come down,” said Gaurav Kumar, managing director, capital markets business at CBRE.
The government's move to ban Rs 500, Rs 1,000 currency notes hit the residential real estate market hard last year, with both sales and new launches declining 18 per cent and 22 per cent respectively, CBRE said. However, things seem to have picked up significantly in January-March quarter of 2017 versus the October-December quarter of 2016.
Residential supply has jumped by 70 per cent quarter-on-quarter to 30,000 units launched in the first quarter, up from only 18,000 units launched in the fourth quarter of 2016, CBRE data showed. Similarly, housing sales have also surged 70 per cent quarter-on-quarter in January-March, with more than 23,000 units sold in the first quarter, compared with 14,000 units sold in October-December.
While, there may be some short-term uncertainties as developers adjust to RERA (Real Estate Regulations Act), CBRE expects, overall demand to continue reviving in 2017, particularly in the affordable housing segment, given the government incentives for the segment and huge unmet demand.
“Next few months there could be a bit of slowdown on new project launches as developers get used to RERA. However, in long-term, RERA will be very good for the industry as it will give confidence not only to consumer, but I also expect institutional funding increasing to the residential market,” said Anshuman Magazine, chairman, India and South East Asia, CBRE.
CBRE executives say the demand is largely being driven by a strong pickup in markets like Chennai, Hyderabad, Kolkata and Bengaluru.
The commercial real estate market is expected to continue seeing strong demand as quality supply lags in key business districts across cities.
“Last year, the overall gross leasing was around 43 million square feet, while incremental supply was less than 40 million square feet. We have been seeing a supply crunch across most preferred office micro markets for the last couple of years, and this is expected to continue for the next 6-8 quarters,” said Rajat Gupta, MD, advisory and transaction services, CBRE.
This year too CBRE expects gross leasing of office space to be around 40 million square feet.
