Real Estate Market in 2016 and Outlook for 2017
Mr. Anshuman Magazine, Chairman, CBRE India and South East Asia
India is one of the fastest growing economies in the world and real estate has been one of the thriving sectors. Several steps taken by the Government; from the Real Estate, Regulatory Act (RERA) and the Goods and Services Tax (GST), to REITs and the latest demonetization drive have all been steps towards bringing in transparency in the sector and boosting the confidence of consumers, developers and investors.
The residential market in 2016 continued its shift from a pure, price play mechanism towards a market that is driven by commitment to delivery, quality and right pricing strategies. High price points, inventory pressures and cautious buyer approach, resulted in a muted demand in key metro cities during the year.
On the other hand, the commercial real estate market in India continues to grow at a steady pace. Positive changes in policy and regulations have given a further boost to this segment. The previous year (2015) had been a record one for the sector, witnessing the highest ever annual office absorption.
In 2017, India will continue to retain its position as a bright spot in the global economy, with better growth prospects expected to support commercial space leasing in 2017. Even though the global economic scenario remains muted, India’s appeal as an established outsourcing market will continue to fuel space transactions by corporate firms based out of the US and EMEA. Despite the disruption caused by demonetization, domestic macro-economic sentiments are likely to remain positive, relative to other major economies in the world, which will also drive leasing from domestic corporate firms. Overall, the outlook for India’s real estate sector remains positive. We can expect more capital inflows into the segment in the year 2017, providing a stronger thrust to the sector.
Some of the key market developments to watch out for in 2017 include:
· Office: Transaction activity to remain strong and occupiers will be more inclined towards pre-commitments in projects expected to become operational in the next 3-4 quarters. We may see Increased interest from institutional investors, PE funds, FDI, etc., in the office segment
· Residential: Anticipated increase in inflow of formal sources of capital and improved transparency is likely to lead to consolidation of players
· Retail: The long -term sentiment is likely to remain strong, global retailers in the apparel segment likely to drive demand, domestic and global F&B operators to also be key demand drivers.
· Warehousing: The focus will be towards consolidation of warehousing at a regional level. GST could spur demand for quality warehousing space – particularly in large cities such as Bangalore and Delhi-NCRs