Air of optimism in Indian realty market

A sudden decline in home loan rates as a result of base rate cut by the RBI has boosted the sentiment in the Indian real estate sector, says Liases Foras in a research note

The performance of the Indian real estate sector during the second quarter as been encouraging and reflects an air of optimism. While price levels kept users’ curiosity intact, lower interest rates lead to increased number of inquiries. “Even as the performance of Q2 FY 2015-16 showed decline on a quarterly basis, the overall buoyancy in the market is palpable. The developments at the macro level seem promising and it is likely that the year will end on a positive note for the residential realty sector,” says Liases Foras in a research note.

According to the firm, during the second quarter, sales across eight major cities in India improved by 17% to 67.9 million sq ft from 57.8 million sq ft in Q2 2014-15.

Decline in commodity prices has favoured the developers by bringing down their cost of construction. This arrested unwarranted rise in price levels and kept the end user’s interest intact, points out Liases Foras. In second quarter of FY15-16, the weighted average price of all the major cities in India stood at Rs. 6,491 per sq ft, with the rise of a meagre 1% both annually and quarterly.

According to Liases Foras, a sudden decline in home loan rates as a result of base rate cut by the Reserve Bank of India (RBI) came as a pleasant surprise and boosted overall sentiment in the Indian real estate   sector. Following the rate cut, some of the leading banks and housing finance companies reduced interest rates on home loans by nearly 25 basis points.

All eight cities cumulatively clocked highest sales in the cost range of Rs50 lakh-Rs1 crore, with the sales of 22.4 million sq ft (33%), followed by cost range of Rs25 lakh-Rs50 lakh.

Increased number of inquiries at the onset of the biggest festive season in the country is accentuating the performance of the sector. Attractive offers, discounts and freebies have definitely led to an increase in inquiries, which is instrumental in improving the conversion rates. However, when viewed from a quarterly basis, the performance has been tepid with Ahmedabad, Kolkata, MMR and Pune on the downside. Hyderabad and Pune witnessed a rise in more than 12% sequential rise in unsold stock, the research note says.

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