It has not been an exciting 2015 for India's property market, and with the continuing sluggish home sales and rising levels of inventory, the new year is not looking promising either. The sector is awaiting the comeback of investors and customers who don't plan to take a plunge until prices stabilize and developers honour project delivery schedules.
So how will India's real estate market look like in 2016? Live Mint reports on the trends to watch:
Year of fund-raising
The market will see most of the investments coming from overseas investors, as private equity (PE) funds are raising almost $4 billion of real estate investments in 2016. For its first residential real estate fund, Edelweiss Alternative Asset Advisors Ltd, is raising $1 billion, while Housing Development Finance Corp. Ltd (HDFC) is close to reaching $850 million. Developers are relying on external pools like PE funds in meeting their funding requirements with project cash flows remaining weak and bank lending not easily available.
A slow and gradual recovery
Developers will focus on project execution and delivery in the road towards a more rational regime. Unlike the recent gloomy two years , 2016 is expected to deliver better home sales with some launches in different locations. From an investor-driven market, it will be an end-user driven market for this year.
With customers not moving and delaying home-buying, home prices will see further corrections after declining to some extent in 2015, while other markets will see steady prices.
More platform-type deals, more offshore investors to come in
A surge in offshore investments is expected as the government eases foreign direct investment (FDI) norms in the construction sector. Apart from growth in smaller-sized investments, it is also expected to see a rise in exclusive partnerships between Indian developers and investors where fund managers are given more control on investments and decision making. After the prolonged slowdown, the real estate market can again experience a cheer-up with the relaxation of FDI norms.
Commercial office space
After keeping the market alive amidst the slowdown, the commercial office sector's star will stay bright and is going to be brighter in 2016. There is a drop in vacancy levels and large firms, mostly in e-commerce, are having a field day taking up new space. Ready commercial spaces are quickly bought out and even under-construction properties are attractive to private equity funds.
