Real Estate 2012 - Let's Hope For The Best

It’s been said that the future lies in building and living in inclusive cities, integrated townships and self-sustaining environments. And this is what would lead to a lot of new trends, technologies, regulations for the realty sector in the coming year.

Hope remains afloat in the form that after a spate of interest hikes in home loan rates by Reserve Bank of India (RBI) last year, 2012 would not witness any further drastic rise. “It’s important for the economy to break free of the vicious impact of inflationary pressures and countermeasures taken by the RBI. Home loan rates need to ease out, and the home buyers should feel assured of a stable equated monthly installments (EMI) outflow,” says Manoj John, Vice-President, Corporate Planning and Strategy, RNA Corp.

Similarly, Dhaval Ajmera, Director, Ajmera Realty and Infra India, points out that it’s fortunate that this time the RBI has not increased the repo rate. “We expect the home loan rate should come down at an affordable limit,” he says.

A lot also depends on the inflation rate easing out in 2012, observe developers. “Inflation and rise in repo rates are likely to be in control. Considering such factors, we are positive that the solutions will be out in the near future and facilitate builders to provide better housing facilities for potential buyers,” says Mayur Shah, Managing Director, Marathon Group. With the inflationary pressure on economy easing, there is also hope that buyers would come back to the market.

Besides, developers point out that there is a huge opportunity in sustainable development. Says Boman Irani, CMD, Rustomjee Group: “The future is bright and the opportunities in sustainable development are huge. They need to be tapped well. I am expecting the sector to become organised in a great way.”

Also, there is hope that approvals and the regulator will see the light in 2012, which will make things much more clear for the real estate sector. Lakshman Bhagtani, CMD, Jaycee Homes Ltd, says: “So once these things happen we shall see costs coming down and which will be passed on to the buyers. So I think the real estate industry can look forward to growth and prosperity in the year ahead.”

However, there are going to be a few challenges in the form of high input costs, shortage of skilled labour, and cyclic nature of the sector. This is something, which developers as a community and policy-makers have to address together. “The input cost like cement and steel should come down substantially. The huge shortage of housing should be tackled on a priority basis if the government wants to fulfill the Housing for All promise. It’s high time that government should accord realty sector industry status,” Ajmera says.

Of late, the RBI has tightened its monetary stance when it comes to lending to the realty sector; developers maintain that there is a need for more funding options. “There needs to be more funding options for the real estate sector. For example, the external commercial borrowing (ECB) option for non-township development or Real Estate Investment Trusts (REITs) that can invest in rental housing projects, lowering development area requirement to 30,000 sq. m for FDI qualification in metro cities,” John says.

At the moment, all eyes are on the improvement of sentiments in the European market. The depreciation of the rupee is going to benefit companies which are heavily dependent on international trade like IT, ITeS and export-oriented companies. They are also the major contributors to the demand of commercial as well as residential spaces. If there is an improvement in the European market sentiments will improve further and we hope that will have a positive impact on the Indian realty market.