What did Indian real estate sector look like during 2013? A Flashback
As we are nearing the end of 2013, the residential real estate prices across the country have started to soften. There is a fall between 1 to 5% across most of the real estate active markets of India. It is yet to be seen what the recently concluded elections will change in the property market, whether 2014 be the same as 2013, will there be higher transactions and more transparency in the system, but till then, let us have a recap of how was the year 2013 for Indian real estate market. True that the market was not at its height and it was not in all an eventful year; however, the year was a mixed bag of positive and negative events and outcomes. Makaan.com brings you a synopsis:
Focus on affordable housing:
Since the introduction of affordable housing (housing under Rs. 40 lakhs) in 2009, it has been a hot topic in the real estate industry. The focus on affordable segment is shared by property seekers as well as developers and builders. It aims at fulfilling one of the basic needs of an individual, “Makaan”. The demand for the affordable segment continued throughout the year; however, the supply and demand did not match as in most major cities affordable housing is available in the extended suburbs of the city. The demand for the segment will be on the rise in 2014 as well, a sentiment that was captured in Festive Realty 2013:
With the challenges such as lack of proper income documentation to verify the income earning ability of the potential home loan consumer and probably future difficultly to adhere to a strict monthly cycle of repayments in case of people having daily incomes, the only possible way to achieve the goal of affordable housing is by having specialists and customized lending institutes that understand such a market and cater to its requirements.
Surely, government is running schemes to encourage affordable housing in the country. Two of the popular ones are Jawaharlal Nehru National Urban Renewal Mission (JnNURM), Rajiv Awas Yojana (RAY) and Affordable Housing Partnership and Interest Subsidy Scheme for Housing the Urban Poor (ISHUP). However, more efforts are to be put in to meet the high housing demand.
Stabilised property prices
Another and one of the most important positive factors for the end user was stability in the property prices. Throughout 2013 the property prices in almost all the key property markets remained stable and some even saw a minor drop. Most of the property markets exhibited 10 to less that 10% rise, which can be put under the stable category. The following table shows the change in property prices over 12 months:
Costs of services and raw materials like transportation and steel have escalated indirectly raising the cost and delivery time of the real estate projects. Another front of escalated costs is the equipments and technologies imported by the developers. India imports some of the construction material and heavy machinery.
Similarly, oil is important in the construction phase and with the prices up by quite a percentage there is a lot of negative impact over transportation prices that have affected the real estate industry. The escalation of costs has disturbed the budgeting of developers, has reflected in form of increased property prices and ultimately caused delays in the project delivery.
Purchasing a home is one of the most common desires of people in India. The available option of home loans is the greatest help one could ever hope for for fulfilling his/her dream of owning a home. However, the help did not come easy in the ending year.The home loan interest rate continued to be high; the interest rate ranged between 11-13% during the year and became a major hindrance for the homebuyers.
From April 2013 onwards, the Indian economy has been registering a growth below 5%. This change or slow economic growth has shown its impact on the real estate industry. The pace of sales has gone down and has remained slow with the slowdown in the economy. The problems that have come with economic slowdown are high uncertainty (both economic and political), liquidity problem, high mortgage rates and subdued buyers’ sentiments.
The Indian rupee hit an historic low against the US dollar, which escalated the costs and reduced the property transactions. With the increase in purchasing cost of daily household objects, the buyers and investors adopted a wait and watch policy and delayed their investments. Most Indian home buyers pay EMIs and sometimes rent; therefore, they felt the pressure to manage their finances with the increasing cost of living.
A new investor would not come in till the rupee stabilises. The investors who invested a few years ago are sitting on either flat or negative positions due to delay in delivery of projects. Most of the investors are looking to cut down their losses and exit the market. In a few cases the investors have even made an exit as and when they could.
Only time will tell what 2014 holds for the real estate industry, till then keep following us and be on a look out for the flashback series as we wrap up 2013.