1. 04 MIXEDBAG
T I M E S P R O P E R T Y
REAL ESTATE INVESTMENTS IN INDIA ARE
KNOWN TO GIVE RETURNS IN LONG RUN
A TIMES OF INDIA PRESENTATION
THERE SHOULD BE A ROBUST SYSTEM
IN PLACE TO CLEAR THE APPLICATIONS
EXPEDITIOUSLY
SATURDAY, JANUARY 23, 2016
The question on the minds of a lot of
customers has been with respect to the
right time to buy. Three key facts make
realty an attractive investment option. It
offers a monthly return in the form of
rentals. It offers a financially stable out-
look in the long run. And it offers realistic
appreciation over other asset invest-
ments.
The objective of the investment should
be a more important priority over the
timing. The timing of the investment
would only be an added factor which oc-
cupies lesser significance when compared
to the objective. Technically, there is no
generalised answer to this question.
Certain prestigious investments in the
real estate sector across cities however,
don't depend on the objective but they get
purchased for the snob value they offer.
Hence they get driven more by timing
than objective.
An average home buyer should contin-
ue to do what they have been doing and
not really wait hoping for some drastic
change. It would only be prudent to make
informed decisions between projects but
not on the investment per se.
It needs to be remembered that there is
very less incentive for investment in cash
assets as they also get taxed at high rates.
The returns earned get eroded by subse-
quent inflation and fluctuation in the val-
uation of currency.
The buyer's mood has moved south-
ward consecutively over the past four
quarters. There did seem a positive tick in
the sentiments around the time of the
general elections in 2014 but the situation
hasn't improved in reality post that. It has
been a pattern that the investor activity
has been shrinking over past three years.
Investors like to go in where they can buy
low and sell high. Price appreciation is on
a slow trajectory, so investors aren't able
to sell much higher than what they buy.
Investment in property is less compelling
under these circumstances. This is a com-
mon trendline and needn't apply to all
markets as we may see exceptional mar-
kets and projects at all times performing
well.
Real Estate buying patterns in the past
10 quarters have generally seen a change
in buyer behaviour from optimism to cau-
IF THERE IS GREATER IM-
PETUS ON MANUFAC-
TURING THAT COMES
IN, IT WILL HELP PUSH
THE STIMULUS FURTHER
AND THAT IS WHEN IT IS
POSSIBLE TO SEE A LOT
OF PEOPLE BEING EN-
ABLED TO COME FOR-
WARD TO INVEST IN
REAL ESTATE
FASTFACT
IdeaofInvestment
MONEYMATTERS
Many factors come into
play before a buyer decides
to invest in property
tious optimism to pessimism and back to cau-
tious optimism. We are now anticipating a stage
where the buying moodometer shifts to the opti-
mistic zone. If someone starts mapping this
curve well and relates it well to the economy
performance of the country, it can be noted that
both go hand in hand. Traditionally, this is how
real estate buying has behaved.
Manufacturing growth has been at a low in
the past three years. If there is greater impetus
on manufacturing that comes in, it will help
push the stimulus further and that is when it is
possible to see a lot of people being able to come
forward to invest in real estate. Manufacturing
would enable a lot of people from the bottom
section of the society come forward to buying.
In fact there is a huge unmet demand for real es-
tate investment which comes in from this sector
as developers have primarily targeted the cream
of the upper middle class and have looked at im-
proving product propositions for this class. That
growth in economy has been on a backfoot over
past three years is also a reason for developers
not being motivated enough to offer products
for this sector.
What would make this negative phenomenon
change into a positive zone of real buying?
Would it be leaving more disposable income
in the pockets of buyers?
Would it be a cut in sale prices?
Would it be lowering of interest rates by the
RBI? More importantly the benefit of the rate
cut being passed on by the banks to the end bor-
rowers?
Would it be increasing liquidity availability to
the developer at lower rates which can effective-
ly lower sale prices?
Would it be lowering of inflation leading to
better cost control and thereby resulting in
owner sale prices?
Would it be increasing availability of raw ma-
terials through policy decisions of government?
The key factors in the short run would be
leaving more disposable incomes and possibly
lowering of rates. A cut in sale price would de-
pend on the context of the project being spoken
of than to generalise as in most peripheral proj-
ects there is little margin with which developers
survive and thereby leaving the option to deep-
en cut in prices as a very tough choice.
It can safely be noted as interpretations of
whether it would be a good time to buy, the an-
swer will always continue to remain a big Yes!
In general, real estate investments in India
are known to produce returns in long run as op-
posed to quick return over a span of three to
four years. People who enter the market with
the intention of being there as long term in-
vestors have generally benefited. If not 100 per
cent, atleast 95 per cent would believe in this.
The remaining 5 per cent may be in their jour-
ney of value appreciation before they also join
the 95 per cent audience.
After the World War II, real estate across the
world has appreciated by 2-3 per cent per an-
num. The value however has got eroded signifi-
cantly in the years following the subprime crisis.
Today, it looks like the right time again to build
momentum on a stable footing and we should all
be part of the cycle to reap its benefits.
-Satish Chander Narayanan, is associate direc-
tor,investments, Cushman & Wakefield
“Commercialspace
absorptionin2015has
beenasilverlining”
Mehul Doshi, director, Doshi Housing,
speaks about changes in the property
market in the last two years
CEOSPEAK
DISHYA.SHARMA
@timesgroup.com
How has the property market
changed in the last two
years?
After the runaway growth be-
tween 2010 and 2012, the
markets started slowing
down from 2013. This slow-
down was mainly due to the
lull in the overall economy.
This has changed the market
in various ways. On the de-
mand side, we see an end-
user driven market that eval-
uates the options available
carefully. Unapproved proj-
ects or yet-to-be construct ed
plans are not considered. On
the supply side, developers
are offering housing options
that cater to investor's re-
quirements and fit their
budget. The emergence of the
compact home concept is an
example of this.
How has the commercial
sector fared inn 2015?
The commercial space ab-
sorption in 2015 has been a
silver lining for the real es-
tate sector in Chennai. With
close to five million square
feet absorbed in 2015, there
has been a sharp decline in
the vacancy levels in the city.
Office rentals are also mov-
ing up. However, the rentals
need to grow significantly to
make commercial develop-
ment viable and pave the way
for new supply to come up in
the city.
How will the real estate sec-
tor be affected by the Real
Estate (Regulation and De-
velopment) Bill being tabled?
The Real Estate Bill has not
been passed as yet so it is too
early to say how it will impact
the realty sector.
If the bill is passed, it will
bring more transparency and
accountability but for it to be
truly effective it needs to
bring in the sanctioning au-
thorities under its fold to en-
sure that all the project pro-
ponents are accountable. The
bill should be prospective
and not retrospective and
should not be made applica-
ble to ongoing projects as it
will lead to complications.
There should be a robust sys-
tem in place to clear the ap-
plications expeditiously.
What developments do you
look forward to in 2016?
This year is going to be the
year of revival of the real es-
tate market in Chennai.
There was a good response to
project launches that hap-
pened in the last quarter of
2015 in the city and with oth-
er positive indicators such as
improvement in the econo-
my, higher levels of recruit-
ment, uptake in absorption of
commercial spaces and an in-
crease in the demand for au-
tomobiles — all these devel-
opments point towards a ro-
bust residential realty mar-
ket in 2016.