Real estate industry is at a cusp and there is clear shift that is happening for positive in the long term.
Looking ahead, there is a tectonic change that is going to happen to the industry, for which we feel that the next three to five years are going to be a different scenario for the real estate space in India. The Real Estate (Regulation and Development) Act, 2016 (RERA) coming into place, is a historic event in itself, an era whereby the industry is going to get institutionalized, which will make it consumer friendly along with enhanced transparency. The Benami Transactions (Prohibition) Amendment Act (PBPT) will ensure that undeclared money which was chasing the real estate industry will be impacted. Third is the Land Act
which is currently under discussion, and is long drawn, but when it happens and whatever time frame it takes, will eventually give a huge supply to the industry.
With consumers becoming more technology savvy, the online real estate platforms are pushing the industry
towards a consumer‐driven market. In the downward interest rate regime, we have already seen rates coming down from 11% to 9 % and the anticipation of another percentage drop seems perfectly plausible.
India can’t be much different from any other country. REITs as an assets class is the requirement of specific set of investors for long term; these investors look for a mix of both ‐ regular returns and a reasonable level of capital appreciation. Majority of the foreign capital in last 3 years has been pumped into the commercial real estate space to lock Grade‐A space.
All markets move in cycles, and the real estate market is no exception, where we have already witnessed the down turn. Post 2008 and more so post 2010, we have seen a general uptick for the industry followed by another bout of sales slowdown, untimely deliverables. A correction phase began almost three years ago, in the residential space, while the market almost bottomed out in the commercial space.
Real estate being a cyclical industry, we should consider investing with a long term horizon of 5‐6 years, and going forward we see better returns than other asset class. We feel this is the correct time to be in the sector, when you have all the regulations coming into place, with expected inflows of institutional capital in the sector, a low interest rate regime, backed by a robust and growing Indian economy.
Excerpts from Aditya Birla Real Estate Fund CEO M. Yadav
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