The real estate sector may be hung over from a two-year downturn, but developers say that one thing never changes: The right product at the right ticket size always sells.
Real estate developers had hoped that the election of a stable government would boost their fortunes. It’s been six months since the Narendra Modi-led NDA has come to power, but there has been no noticeable change in demand. Unsold inventory continues to pile up across the country. High interest rates and a sluggish sub-5 percent GDP growth in FY14 have resulted in people holding on to their purse strings. The fallout is that real estate prices have barely budged over the last two years. But sentiment is picking up, and cities like Bangalore have developed a vibrant and healthy real estate market.
As part of the fifth session of the ‘Forbes India CEO Dialogues: The Leadership Agenda’, industry leaders shared their views on the steps needed to revive the sector. Boman Irani, chairman and managing director of Rustomjee Group, Subodh Runwal, director, Runwal Group, Khushru Jijina, managing director of Piramal Fund Management, Ashish Puravankara, joint managing director of Puravankara Group and Sunil Kaushal, chief executive officer of India and South Asia at Standard Chartered, discussed a roadmap to get the sector growing again.
Developers on the panel believed that there would be an uptick in prices within six months, once there is a correction of interest rates. Financiers, however, said that this is at least 12-18 months away.
Excerpts from a discussion moderated by R Jagannathan, editor-in-chief, Forbes India.
R Jagannathan: We have certainly seen a turnaround in sentiment. Is that percolating down to the real estate sector?
Boman Irani: Yes. People have started noticing that there is a strong government, which has made all the right noises. The government started with something as simple as the ‘Swachh Bharat Abhiyan’ (Clean India Campaign) and then made a grand announcement promising homes for all by 2022. People feel good about these measures. Emotion is what drives purchase, and real estate is driven by a desire to improve one’s lifestyle. The fact that everyone is hoping that the GDP will improve and interest rates will come down is adding a lot of positivity on the ground.
The flipside is that our industry has a lot of pundits and they like to make tall statements, often crying foul about prices being too high. This brings down public sentiment. They have still not started making the right noises. For the end user, any time is the best time to buy, provided he finds what he is looking for in his budget.
Jagannathan: Bangalore is driven more by fundamental demand and less by investors, unlike, say, Mumbai. Do you see any change in demand?
Ashish Puravankara: Bangalore has been quite stable for the last 2-3 years. One distinct change that we have noticed is that pre-sales have seen a very good response. Earlier, we would sell 10-15 percent when we launched a project. Now we are selling 40-50 percent in the first three months of a launch, and these are at good prices. The end-user demand is very strong. People who come to the city because of their jobs end up staying back. Hence, there is a lot of demand.
Jagannathan: Mumbai is a different market from Bangalore in that there are a lot of speculative investments. With that in mind, do you think Mumbai would take longer to revive than Bangalore or Chennai?
Subodh Runwal: If you look at Mumbai from a 30-year horizon, you’ll see that real estate has outperformed all asset classes. What we are witnessing now is a temporary blip, but if you look at a good developer, you will see that his projects are still selling out quickly. Recently we had people queuing up at 5.30 am for a project we launched.
Source: Forbes India