Focus 2013 in Realty

The year 2012 had few signs of positive growth with inflation below the RBI’s levels and with growth in the Index of Industrial Production (IIP) which was a breather for year 2013. Here are some insights with regard to inflation in economy and policies which would have an effect on real estate for 2013:

1. Economy – Although there is a risk of inflation but RBI would focus towards growth in 2013. It is expected that interest rate would witness a downward trend in 2013 which would lead to reduced home loan rates inturn leading to increase in buying of realty assets. An upward trend in consumption will lead to urbanization despite the slowdown in GDP which will drive the year 2013.

2. Policies – Initiatives for better policy making are being taken which would improve the investment in the near future in the year 2013 of real estate. The Real Estate Regulation Bill is expected to be tabled in the winter session of the parliament; the real estate investment trusts (REITs) or real estate mutual funds (REMFs) are also expected to get launched in 2013; and the Land Acquisition and Rehabilitation and Resettlement Bill is to be tabled in the upcoming budget session in 2013.

3. Infrastructure – In the infrastructure sector a substantial FDI of USD 2.8 billion has been achieved which is accountable for a notable 7.7% of the total FDI inflow in the Financial Year 2012. In the year 2013, relaxation of FDI policies in multi-brand retail is expected to boost the investment in back-end infrastructure development such as logistics. Moreover, an FDI of up to 100% will be permitted under the built-up infrastructure which will surge the development of the city and the infrastructure in at the regional level in 2013.

 

4. Commercial Real Estate – There is not much significant change in the absorption of office space in 2013 as compared to year 2012. There is expected rush for prime locations in prime buildings in the year 2013. Fresh projects are being launched and vacant spaces are being occupied in no time. With this scenario rents are certain to get a boost. Special economic zone is favorite among the occupants to avail the benefits.
 

5. Residential Real Estate - REITs in India allowing investments in rental housing is a new trend worth a watch. Once the framework and details of REIT are formulated it is  likely to drive the investor demand across the prime cities in India in 2013. Another interesting trend observed recently in the last two years was that the stock in the range of INR 2,000-3,000 per sq ft was sold out very swiftly. In 2013, there will be a shift in the range to INR 3,000-5,000 per sq ft with the increase in inflation and construction costs.

6. Education and Health Care – There is aggressive growth in skill based educational institutions in 2013, particularly in the non-metro cities of India, where there are new opportunities. In the health care sector, hospital chains along with day care centre are expected to expand aggressively in 2013. Both these sectors are expected to attract private equity investment in 2013.
   

 

7. Delhi - Most of the absorption in Delhi NCR is likely to focus around Gurgaon and Noida, with the exception of Delhi International Airport Limited (DIAL) and few select stand-alone Grade A projects of Delhi. As the demand supply gap of quality office space is expected to increase because of the supply constraints in select precincts of Delhi NCR, rents are expected to increase in certain micro-markets.

Therefore, these factors will affect the real estate business in year 2013.