Real Estate Outlook for 2015 by Sachin Sandhir, MD, RICS South Asia

RICS’ outlook for 2015 indicates a balanced housing recovery and improving consumer sentiment. The current scenario will change as the RBI will cut the interest rates by 50 basis points next year. This will help real estate companies to borrow more from the market and institutional investment and finance companies. Thus private equity investments will increase in the real estate space leading to increased supply from current levels of existing projects.

Momentum in the housing sector was generally subdued in the first half of y r 2014. It got some push with various subvention schemes being introduced in later part of the year 2014. While new launches were few, sales were reasonably low during the entire year. According to industry estimates inventory in some parts of the country was as high as 50 months.

RICS believes that there will be a pick-up in new home sales across all key regions leading to more supply in the Z30-50 lakh housing segment in the coming year. This holds true also because development firms will turn their attention to completing the existing projects stuck or delayed from past two to three years. And most new age buyers are now looking for housing in this price band. In line with the recent correction or stagnation in prices, builders will keep the prices of new homes reasonable and will strive for More sales by bringing in more subvention schemes and lucrative deals in the first half of the year 2015. It is also a belief that housing rental market will remain stable and continue to prosper in the coming year.

While commercial real estate has lagged residential real estate in 2014 in terms of supply and demand, there is a huge opportunity for companies doing commercial real estate (CRE). As opportunities within the evolving industry are abundant, there is also a great amount of scope for allied industries due to the demand for quality CRE. Companies offering end-to-end solutions for offices; companies offering services related to establishing ready-to-move-in spaces will prosper due to the rising demand for quality offices.

• RICS .believes that the new home sales will pick up across key regions leading to more supply in the Rs 30-50 lakh housing segment. This holds true also because development firms will turn their attention to completing the existing projects stuck or delayed from the past 2-3 years.
• The housing rental market will remain stable and continue to prosper in the coming year.
• While commercial real estate has lagged behind residential real estate in 2014 in terms of supply and demand, there is a huge opportunity for companies doing commercial real estate (CRE).
• Information Technology (IT) and information Technology enabled services (ITeS), Banking Financial services and Insurance (BFSI) and manufacturing sectors together occupy more than 75 per cent of the total office space in India.

This will boost the growth in Information Technology (IT) and Information Technology enabled Services (ITeS), Banking Financial Services and Insurance (BFSI) and Manufacturing sectors resulting in significant demand for office space. Together, these three sectors occupy more than 75 per cent of the total office space in India.

The events of the recent past such as announcement of REITs, awarding of new bank licenses, development of smart cities, growth of industrial and retail sector will push for more growth and increased supply of new stock. Of these some of the large CRE firms have been waiting for an opportune moment to list their stock on bourses under REITs. Hopefully year 2015 will see such announcements from a number of firms wanting to enter the market at higher valuations, This would galvanize the private equity investment into the CRE, With rates coming down next year, it is likely that development firms in CRE space will benefit hugely.

RICS believes that supply and the number of large scale transactions in CRE space will generally improve on account of demand for quality space. Retail segment will especially show more progress on account of entry of foreign brands looking to tap on the young consumers in India.