Turnaround in real estate market may take a year: Report

Hyderabad, July 30 (IANS) India’s real estate market is in bad shape due to credibility crisis faced by the developers and overall macroeconomic scenario and the turnaround may not happen for one more year, said Knight Frank, the leading independent global property consultancy.

Stating that all the major markets in India are shrinking, especially in the residential sector, it warned that if the investors’ confidence is not restored, the crisis will engulf the entire country and will have serious impact on real estate industry.

The consultancy painted a gloomy picture while releasing its report for the first half of 2015, covering both residential and office markets in the cities of Mumbai, National Capital Region (NCR), Pune, Bengaluru, Chennai and Hyderabad. The report includes residential market analysis of Ahmedabad and Kolkata.

Gulam Zia, executive director, advisory, retail and hospitality, Knight Frank told reporters that Delhi is the worst performance city in the country with the residential market size shrinking to half when compared to last year.

NCR, on an average, used to absorb 100,000 units a year but during 2014, the number plummeted to 40,000. Only 14,250 units were sold in this first six months of 2015 against 28,500 units during the same period last year.

Delhi may end the year with 20,000 units and in that case many cities would have overtaken it, with even Ahmedabad today touching 20,000, he said, adding Mumbai, Pune and Bengaluru have already overtaken NCR.

Even Hyderabad with 14,000 to 15,000 units during the current year will come closer to NCR.

Zia attributed the bloodbath in NCR market and the problems in other markets to the fact that investors are fleeing the markets due to delay in projects.

“Investors have lost faith in developers. That is the biggest concern. Unless investors’ confidence is restored in the market, nothing will change,” he said.

He said the turnaround will also not happen soon as the economy is still passing through a rough patch. Job creation because of initiatives like Make in India will not happen at least for another year and the reforms will also take time to deliver.

According to the report, the residential market is at an inflexion point for the first time in last five years. The current unsold investor level stand at over seven lakh units and it would take over three years to exhaust. The market has also seen a sharp drop in price growth. It reduced from nine percent to two percent in the last three years.

The report said the office space uptake has improved due to demand from AIT/ITES, banking and financial services. Other sector including e-commerce, consulting and media gained prominence during H1 2015.

It, however, highlighted that there is severe shortage of quality office space. The demand consistently surpassing supply since 2014.

There are positive trends in Hyderabad market due to the political stability since last year. The housing segment in the city has stabilized while office market is recovering.

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