Real Estate Sector in India -2016, The Final Frontier

The down trend in the Indian real estate market started somewhere in 2013, it was then linked to the economic slowdown and as other sectors were going through a slow down, so was real estate. A number of predictions have been there by various agencies predicting the recovery cycle in 2015 then 2016 and now being shifted to 2017. Though the Indian economy started its recovery cycle in 2014 with a steady growth rate of 7.5%, the real estate website in India is still struggling to catch up or show signs of any recovery. One obvious factor is that as the real estate industry has a long inventory cycle as compared to other sectors and therefore, it would take more time for its revival.

Let’s look at the American picture as an example. The American real estate went through a crash from 2006 to 2009 i.e. 3 years and the recovery started in 2010, six years down the line it is still trying to reach normal levels and at present are the lowest compared to the historical trends. The primary reason for this has been that the first time buyer activity has been low and is still only 30% of the total share, which earlier used to be more than 40%. One can argue that we cannot compare the real estate in India with that of America; however, one needs to draw intelligent conclusions in the Indian context. A few of these are listed below.

(a)       If real estate sector in the most developed nation of the World has taken 6 years to come on the recovery path, India which is a developing Nation would at least take equal years if not more. The real estate sector in India needs to understand this aspect; there are no quick recoveries, it is a marathon and not a sprint. This implies that the sector needs to plan at investments accordingly.

(b)       China as the second largest economy in the world is crashing, Greece and Brazil have already had their setbacks. The ISIS presence in Middle-East and now Europe is creating the refuge issues leading to economic crisis. BRICS as an organisation, which was launched with a lot of hope, has failed to generate the required enthusiasm as two constituent members are struggling with their internal economies. Finally, the change of guard of the American president end of this year has led to a policy paralysis in World politics. All these are finally going to impact the global economy in the long run. Indian economy is not insulted form all this; it will face the brunt and in turn the industry. Indian real estate sector needs to carry out an introspection and needs to mature as an industrial sector to plan and tied over this coming phase. It needs to grow over ‘the quick buck’ syndrome, which it was riding on through the last decade.