Wednesday, 17 June 2015

Factors defining the Real Estate Industry in 2015

The government`s reform focused agenda for reinvigorating the real estate sector will possibly give fresh impetus to the real estate industry in 2015, with inflation gradually going down and borrowing rates expected to go down,  will encourage potential buyers planning to buy a house to finally go ahead and avail home loans. 

The market saw a revamp and developers are now by and large focusing on affordable housing, this will go a long way though not completely in bridging the existing wide gap between demand and supply of affordable homes, also with property rates staying stable and good deals being offered by developers to clear their inventory will encourage buyers. With the economic activity picking up and Corporate India making it clear there will be hiring of new talent in various sectors to take care of the growing business needs which means that there will be rise in jobs and income which is favorable for both residential and commercial real estate projects. 

In 2015 developers will be focusing more on right-sizing and right-pricing of their projects, better designed and more efficient homes will define the real estate industry.  Affordable housing will be the key word in 2015. While the government at the center has spoken very clearly about their agenda to push for affordable housing it is the state governments that will have to carry out these initiatives. Affordability is a term that has different meaning in different markets in India. 

Each city has its own benchmark for affordability; developers in each city are aware of these facts and must focus on providing affordable housing in their cities. Affordable housing is not a difficult thing to deliver the challenge for the developer however lies in co-coordinating this format in a way that their existing brand image is not affected.  

In commercial real estate over the last few until 2014 the supply was greater than demand with the developer expecting a turnaround in economic activity, because of the slowdown of the economy the office real estate prices failed to recover up to late 2014 however we did see the start of a gradual turnaround. This can be associated to the fact that real estate developers began to reduce the supply which was high earlier to a normal level of demand which helped them to bring down the vacancy rates. In 2015 the probable demand should be around 26 to 30 million sq ft improving slightly from the level witnessed in 2014 however with India`s GDP set to strengthen further a positive growth in commercial real estate cannot be ruled out, in fact one positive development seen soon after general elections in 2014 are in the office market leases, this moderate to healthy leasing activity should continue in 2015 as well. 

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