Anuj Puri, Chairman & Country Head, Jones Lang Lasalle Meghraj
What is the current situation in real estate markets?
There is overheating of prices in certain Northern regions, reduced liquidity among developers because of the credit crunch and a watch-and-wait stance among property buyers as they anticipate a blanket correction in the sector. The credit crunch and the US recession are not the only factors involved here. Interest rates have shot unrealistically high begin with. However, the current market dynamics notwithstanding, the property market in India will continue to thrive – albeit at a more realistic rate. Prices are stagnating, and we can reasonably expect a correction in certain areas over the next twelve months - depending on specific location sector and property typology. Meanwhile, demand for property in certain locations will continue undiminished due to the existing and upcoming market drivers there.
What are the opportunities and challenges for the Indian real estate sector now?
We do have a challenge situation on our hands, but it is one brought about by lack of faith and information. The origin of the challenge does not lie in foreign markets, but our own. Nor is the challenge anywhere as big as its is being made out to be. India is nowhere as vulnerable to fallout of the US recession as its is being fashionably assumed. The international credit rating agency Standard and Poor’s has clearly stated that India and China are in the category of ‘not vulnerable’ countries.
India is still among the biggest growth drivers. Foreign players will continue to invest in India and go slower on low-priority markets, especially the developed ones where investments take longer to pay off. There are, for instance, immense opportunities in Indian retail. The segment of India’s more affluent shoppers is 6 million strong – a segment that spends approximately $28.36 billion annually. India still maintains its ranking as the 5th most attractive of all emerging retail markets in the world.
Has the slowdown in market affected the real estate industry in terms of property sales?
There has been a slowdown in domestic transactions and we are indeed witnessing a correction, but this is brought on by the sharp 200-300% rise in property rates seen over the last two years. It is perfectly natural and expected that there would be an adjustment of such irrational growth. The sales volumes previously predicted for 2008 now need to be second-guessed. However, lack of growth does not equal a setback – only a period of stagnancy. Indian real estate continues to be a good risk diversifier that generates excellent risk-adjusted returns.
What are the issues the sector is currently facing in India?
Lack of infrastructure, lack of transparency and unrealistic rate inflations brought on by speculation in many geographies across all sectors come readily to mind. Thankfully, the Government has taken various proactive steps to curb inflation and to drive out speculative investment. Regulators and progressive incentivization schemes for townships and SEZs will help steer the boom in more constructive directions. We are also on the verge of seeing the introduction of REIT-style investment routes to funnel in additional and sustained foreign funds into the sector.
How could one express the current scenario in figures, and what do they mean?
There is an existing shortage of 25 million residential units. The residential sector will continue to be the driving force. Almost 91% of all real estate investments are in the residential sector. Approximtaley two million residential units admeasuring an average of 1,200 square feet will be constructed annually.
In the commercial sector, each year sees the development of approximately 60 million sq ft of office space. There has been a slowdown in absorption but no sign of increasing vacancies. In the retail context, over 300 shopping malls are under construction and will be operational by the end of 2008. Each year sees the development of approximately 25 million sq ft of retail space.
How can the sector be strengthened?
There is a clear need for schemes specifically designed to put in much-required infrastructure, and further incentivization of affordable housing projects to encourage developers to address the monumental demand for residential space from the middle class. The sector also needs the benefit of single-window clearance provisions for progress-oriented projects.
Contributed By : Arun Chitnis
What is the current situation in real estate markets?
There is overheating of prices in certain Northern regions, reduced liquidity among developers because of the credit crunch and a watch-and-wait stance among property buyers as they anticipate a blanket correction in the sector. The credit crunch and the US recession are not the only factors involved here. Interest rates have shot unrealistically high begin with. However, the current market dynamics notwithstanding, the property market in India will continue to thrive – albeit at a more realistic rate. Prices are stagnating, and we can reasonably expect a correction in certain areas over the next twelve months - depending on specific location sector and property typology. Meanwhile, demand for property in certain locations will continue undiminished due to the existing and upcoming market drivers there.
What are the opportunities and challenges for the Indian real estate sector now?
We do have a challenge situation on our hands, but it is one brought about by lack of faith and information. The origin of the challenge does not lie in foreign markets, but our own. Nor is the challenge anywhere as big as its is being made out to be. India is nowhere as vulnerable to fallout of the US recession as its is being fashionably assumed. The international credit rating agency Standard and Poor’s has clearly stated that India and China are in the category of ‘not vulnerable’ countries.
India is still among the biggest growth drivers. Foreign players will continue to invest in India and go slower on low-priority markets, especially the developed ones where investments take longer to pay off. There are, for instance, immense opportunities in Indian retail. The segment of India’s more affluent shoppers is 6 million strong – a segment that spends approximately $28.36 billion annually. India still maintains its ranking as the 5th most attractive of all emerging retail markets in the world.
Has the slowdown in market affected the real estate industry in terms of property sales?
There has been a slowdown in domestic transactions and we are indeed witnessing a correction, but this is brought on by the sharp 200-300% rise in property rates seen over the last two years. It is perfectly natural and expected that there would be an adjustment of such irrational growth. The sales volumes previously predicted for 2008 now need to be second-guessed. However, lack of growth does not equal a setback – only a period of stagnancy. Indian real estate continues to be a good risk diversifier that generates excellent risk-adjusted returns.
What are the issues the sector is currently facing in India?
Lack of infrastructure, lack of transparency and unrealistic rate inflations brought on by speculation in many geographies across all sectors come readily to mind. Thankfully, the Government has taken various proactive steps to curb inflation and to drive out speculative investment. Regulators and progressive incentivization schemes for townships and SEZs will help steer the boom in more constructive directions. We are also on the verge of seeing the introduction of REIT-style investment routes to funnel in additional and sustained foreign funds into the sector.
How could one express the current scenario in figures, and what do they mean?
There is an existing shortage of 25 million residential units. The residential sector will continue to be the driving force. Almost 91% of all real estate investments are in the residential sector. Approximtaley two million residential units admeasuring an average of 1,200 square feet will be constructed annually.
In the commercial sector, each year sees the development of approximately 60 million sq ft of office space. There has been a slowdown in absorption but no sign of increasing vacancies. In the retail context, over 300 shopping malls are under construction and will be operational by the end of 2008. Each year sees the development of approximately 25 million sq ft of retail space.
How can the sector be strengthened?
There is a clear need for schemes specifically designed to put in much-required infrastructure, and further incentivization of affordable housing projects to encourage developers to address the monumental demand for residential space from the middle class. The sector also needs the benefit of single-window clearance provisions for progress-oriented projects.
Contributed By : Arun Chitnis
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