The housing bubble may have burst, but is on a comeback trail
Refusing to be out of the limelight, the real estate sector is hitting the headlines all over again. A couple of years ago, real estate was the talk of the town when the property market was booming and seemed to be the best bet for investors. These days too, the sector’s development is making headlines, albeit for wrong reasons. Realty news today is marred with negativities such as liquidity crisis and project delays and property transactions have come to a virtual standstill. Any talk of investment in real estate is frowned upon. If the earlier optimism was a case of irrational exuberance, the pessimism of recent days too is uncalled for.
“It is true that the sector is going through a rough patch, but so are other sectors in the country. Yes, intense speculation had artificially jacked up property prices but speculators have either bowed out or are on their way out,” says Naveen Raheja, managing director of Delhi-based Raheja Properties. The sector may be down, but certainly not out. The future growth for the sector will come from the segments, which cater to the masses and are affordable, he adds.
Even in times of a slowdown, Kolkata-based Bengal Shristi Infrastructure Development is spending more than Rs 2,000 crore towards the development of more than 90,00,000 sq ft at Asansol, Haldia, Ranigunj and Krishnanagar. “We are and we will be investing where there are end-users. Our investment will be fuelled by actual demand so we are not much worried about returns on investment. They will come in due course,” says Hemant Kanoria, director, Bengal Shristi. He adds that the company plans to sell properties in these areas at 20 per cent premium over local development.
Kumar Sankar Bagchi, managing director, Bengal Peerless Housing Development Company, agrees. “Yes, the future lies in affordable housing. We have already started moving to far-off suburbs and smaller towns such as Shantiniketan and Seuri in West Bengal. Many people in those places are sitting on idle funds because they did not have too many spending options. But they now have aspirations and, therefore, there is a demand for comfortable housing from people who actually propose to stay in those houses,” he says.
In fact, even big developers such as DLF, Unitech, Parsvnath and Omaxe have realised that future growth would lie only in those verticals which come within the budget of a large majority. “Our focus in 2009 will be to build houses that are affordable to a large majority,” says Sanjay Chandra, managing director, Unitech.
A large number of end-users take home loans to buy a house, says Rohtas Goel, chairman Omaxe. “Our focus will be to build houses wherein the EMI (equated monthly installment) for home loan comes under one’s monthly budget,” he says.
Raheja says if EMI is at par or marginally higher than the monthly rental paid by an end-user, only then does one think of buying a house. “A vast difference between monthly rental and EMI deters an end-user from purchasing a house,” he adds. In addition, the real estate sector is set to get a major boost with the growth of the warehousing and logistics industry as well.
A recent report by Cushman & Wakefield, a global real estate consultancy, estimates that India’s logistics industry will grow 15 to 20 per cent annually and would generate revenues to the tune of $385 billion by 2015. The report says that over the next five years, approximately 110 logistics parks and 45 million sq ft of warehousing space is expected to be developed across the country. “This upsurge in the logistics and warehousing industry will, in turn, boost real estate activities in various locations across the country,” says Sanjay Dutt, joint managing director Cushman & Wakefield India. The report points at Mumbai, Hyderabad, Chennai and Kolkata as the hub for logistics parks.
“In 2009 and a few years after that, housing driven by actual needs will be the most important and attractive sector for developers,” says Harsh Neotia, chairman, Ambuja Realty. This in turn, will set a chain reaction in motion, creating demand for offices, shops, hotels, hospitals, schools, colleges and other institutes, he adds.
Courtesy: Finance Chronicle dated 07/01/2009
