How did real estate fare in the year 2014?

2014 proved to be a mixed bag for the Indian real estate industry. The sluggish growth pattern displayed by Indian real estate might suggest a decline in demand for homes but economic slowdown’s effect on the real estate market was mixed. Marred by a massive drop in new sales and supplies, real estate industry got the much needed respite by government’s proactive policy making to spur growth in the industry.

The 2014-15 union budget got the ball rolling with government easing the Foreign Direct Investment (FDI) norms and generous investments were poured into the affordable housing category, simplification of real estate regulatory and land acquisition bill, amongst other things, were the key steps initiated by the government. These steps showcased to everyone the new government’s resolve to reform and revive the sagging industry.

Some of the key trends witnessed in the year 2014 are as follows:

Impetus for affordable housing: Sensing the rise in demand for affordable housing across the nation, government’s initiative proved to be an impetus and fillip for affordable housing segment. Builders followed suit without any delay. According to industry experts, more than 50% of total sales generated in 2014 were in the price bracket of Rs. 25 Lakhs and Rs 50 Lakhs. 2014 can thus safely be called as the year of affordable housing.

Affordable new supply: Majority of the new supply generated catered to the booming demand in the Rs 25-50 Lakh price segment, with more than 1.5 Lakh units up for grabs. HUDA, DDA and other development authorities launched plenty of affordable houses in 2014. For ex: DDA launched more than 25000 units in the past year.

Reduction in Inventory: A recent study claims that the sales of residential real estate dropped by more than 35%, which pales in comparison to the staggering fall in supply. This mismatch between demand and supply resulted in a decline in inventory of the unsold units. But except Gurgaon, all other major cities, especially Mumbai and Noida, still have a massive inventory of residential real estate to unload.

Demand: In 2014 a majority of markets were driven by demand from investors rather than the end users. Hyderabad, Bangalore, Ahmadabad and Kolkata are the only examples that come to mind if one considers markets driven by end users. While the major cities which witnessed a huge flow as investments are Delhi, Pune, Gurgaon, Mumbai, Chennai and Bhiwadi.

Reduction in new supply: Except Gurgaon, every other major city saw a decline in the supply of residential real estate units. Only 2.6 Lakh new units were launched in 2014 which almost a 52% decline when compared to last year. Economic slowdown and existing pile of inventory with builders can be blamed for the same.

When compared to the year gone by, 2015 seems to be a much better year in comparison for the real estate industry. Here’s how 2015 is shaping out to be a year of real estate’s comeback:

– GDP growth rate has risen above 5% and is on its way up. Economic activity has also surged and many MNCs have zeroed in on India to set up their shop. The real estate industry will definitely find all of the above favourable.

– Inflation is a thing of the past and crude oil prices have fallen like a house of cards. Thus, RBI would be motivated to make a reduction in interest rates. As a result, interest rates for loans will decline and more people will become capable of purchasing their dream home.

– Now emphasis is on delivering affordable housing projects. Thus gap between supply and demand will be bridged. This would raise liquidity in the market.

All the signs point in the right direction. A strong comeback is definitely on the cards and 2015 could prove to be the best year for real estate sector thus far.

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