Hopes of an early turnaround of the beleaguered real estate sector, kindled by the installation of a stable, reform-oriented government headed by Prime Minister Narendra Modi, were belied in 2015.
The fund-starved sector continued to be bogged down by weak demand and muted sales. As the year draws to a close, despite some signs of revival, the delayed reforms continue to take a toll on the business sentiment, and it may take long before the sector gets stabilised with healthy long-term sustainable growth.
The realty sector reeled under fund crunch that has proved to be its biggest bane over the last few years.
According to Crisil, India’s top 25 developers, making up for 95% of the sector’s capitalisation, face the risk of refinancing Rs30bn ($452mn) of debt.
These fund woes, besides delayed regulatory permissions, were responsible for large-scale project delays and resultant cost escalations, badly affecting the sentiment of property buyers and investors.
Similarly, Liases Foras said out of the total space of 3.2bn sq ft under construction across 25 cities, about 34% of the space valued at Rs1.65tn was delayed by over a year.
In this grim backdrop, the year saw the rise of a cautious and discerning buyer taking a backseat in the property market, largely concerned about the safety of his investment.
Even the investors - disillusioned and dejected by investments stuck and returns falling - withdrew from the market.
So much so that even the attractive marketing schemes like subsidised home loans, EMI waiver till possession and other discounts on registration, car parking and club fee offered through the year, failed to entice buyers.
The demand-supply mismatch further gave upper hand to buyers and investors.
On the investment front, it was a year of record inflow of foreign direct and private equity investments, with the investments by the latter touching a record high of $14bn till October, 2015.
Funding to income yielding office segment also surpassed residential real estate. In 2016, too, commercial and residential in the top seven cities is expected to continue getting major private equity funding, while retail will gain traction.
Amid large-scale delivery defaults, slow sales and huge unsold inventory, residential real estate like last year, remained in the slow lane.
Luxury real estate was badly hit, though affordable housing segment gained some ground.
There were however some green shoots especially in cities like Mumbai, Bengaluru and Hyderabad. The year 2016 may however see some revival, with greater impetus to low- cost housing.
On the retail real estate front, it was a no-show with hardly any quality retail space added to the stock. Though no significant quality mall space is expected to be added next year, we may yet see the positive trend of emerging Tier II and Tier III markets.
There was a big boost to office space absorption of 3.5mn sq ft, the second highest after 2011, with rise in rents across cities, especially in certain segments in Tier I cities. The year 2016 is expected to see consistent increase in demand driven by IT/ITES, like this year.