Indian Residential Real Estate in 2014

2013 is coming to an end. It was a tough year for Indian real estate, with slow sales of new homes. In many high-end, posh property markets, prices softened owing to poor demand. However, affordable locations were not as badly hit.

"The slowdown in the Indian economy continued as the Reserve Bank of India revised the real GDP growth rate forecast for 2013-14 downwards to 5.0% from 5.7%. Economic slowdown has had a an impact on the end-user sentiments that has impacted the absorption of residential units ultimately leading to a slowdown in the values," according to Sanjay Dutt, executive managing director, Asia Pacific, Cushman and Wakefield (C&W), a global real estate consultancy.

So how is the new year 2014 placed in terms of residential real estate market?

Challenges that the Indian economy has been facing, such as high fiscal and current account deficits, delay in reforms, are unlikely to go away until the 2014 general elections (for Union government). So the first half of 2014 will see similar environment as 2013. If the general election results in a stable government, the picture may become brighter. Also, tapering of the US Federal Reserve's liquidity injection Quantitative Easing programme in 2014 could result in further investment outflows. 

"In the residential real estate sector, select locations may witness healthy activity and garner good response from developers, investors and end-users alike due to ongoing infrastructure developments such as metro rail and mono rail connectivity, construction of flyovers, inner and outer ring roads, which are at various phases of construction in Bengaluru, Chennai, Mumbai and NCR," says Dutt of C&W.

House prices are expected to remain more or less stable during 2014. However, it is a very generalised statement for a market driven by highly localised factors. Many markets with demand from home buyers in the affordable segment can continue to see capital appreciation.

Inventory pile-up has been a problem for many locations, including Delhi-NCR property market. One can expect prices to decline as builders try to generate cash flow and service their loans. Locations in Mumbai and NCR that have a higher margins can be expected to witness price corrections. In Southern India, prices may hold ground in most places, except peripheral locations with rapid housing development that may see some minor corrections.