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Indian Real Estate: An analysis of 2016 & Concentration into 2017


Introduction It’s time to study what happened in 2016 and what is to be expected in 2017. The real estate industry in 2016 saw major changes , mainly on the policy front.


Breakup Of City-level Investments Residential and office investments were a majority in 2016, retail is expected to start seeing better traction. Investors will remain focused on the top seven cities.


Residential Real Estate •

Capital Values (CVs) across cities, especially in Hyderabad, Pune and Bengaluru, saw gentle appreciation in 2016 and this trend is expected to continue in 2017.

The 3 biggest markets in terms of volumes of unsold units (including underconstruction) are NCR, Mumbai and Bangalore. By volume, NCR stands 37%, Which is more than a third of India’s unsold (including under-construction) residential inventory.

Less than 5% units among the total unsold inventory across the three metros are ready for possession. Bengaluru, a largely end-user-driven market, has the lowest unsold inventory in project launches up to the year 2010.

In Mumbai, the percentage is higher, but if we discount the longer timelines it takes for large projects to complete, it would fall under 5%.


Real Estate Investment Trusts (REITs) Budget 2016-17 exempted dividend distribution tax on special purpose vehicles. Rules for REITs were relaxed, and the investment cap in underconstruction projects was raised from 10% to 20%. SPVs are now allowed to have holdings in other SPV structures, and the limit on number of sponsors has also been removed. Currently, around 229 million sft of office space can be seen as REIT-compliant. If even 50% of this were to get listed, we are looking at a total REITs listing worth USD 18.5 bn.


Advantages 

REITs assure to open up the real estate market to smaller investors in the next year. International banks and financial institutions are under better cost and compliance pressures and are therefore estimated to outsource more jobs to India. For various companies, especially in non-technology area, money saved through leasing is reinvested in business. Requirement for office space is evolving, and other corporates across industries will take on innovative workplaces in the near future.


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Indian real estate analysis of 2016 & concentration into 2017