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Real Estate Sector in 2015 was a Mixed bag, What 2016 Holds for Real Estate?

While the year 2015 proved futile in bringing any cheer to the real estate market with stocked inventories and delays in the projects, the hopes of realtors and buyers are set high in the year 2016. Have a glimpse of the past and future trends of real estate market.

Indian Real Estate in 2016

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With both positive and negative trends, year 2015 was a mixed bag for the Indian real estate sector. From expectations of renewal for the sluggish realty sector to news of Cabinet approving the Real Estate Bill, 2015 has transferred the hopes for the sector in this New Year 2016. 

Commercial/Office Space

India’s office space absorption proved to be the second-highest figure in the India’s history after 2011 during 2015 that stood at 35 million sq. ft. While pan-India vacancy is still at 16%, realistic vacancy actually stands about 8-9%. Rents increased across Indian cities in 2015.

While there will be a continuous demand for leased spaces in 2016, quality supply will be lower.

Residential 

2015 did not saw any significant growth in the residential real estate market. However, the good part is that the bad days seem to have lessened. While sales have picked up in a few major cities like Mumbai, Bangalore and Hyderabad, launches have lowered in cities like Mumbai, which has slightly reduced the inventory. The initiatives taken by the developers like offering attractive schemes and deal terms, along lowering of interest rates by the Reserve Bank of India (RBI), have stimulated the fence-sitters.

2016 is hoped to bring an end to the long and painful journey of the residential real estate sector in India. It is expected to turn into an organized industry.

Capital Markets

In terms of capital markets activities, 2015 has been an interesting year in real estate. Although the focus continued to remain at peak on residential and commercial projects, platform-level deals and entity-level investments also came into the limelight that indicates rise in the investors’ confidence. Residential projects catched the minds of a considerable share of funding in terms of assets; however, equity investment in this space is still minor.

Income-yielding office projects attracted most of the equity investments. In all, the stage is set for a superlative show this year. In fact, 2016 may bring the kind of investment activities that were seen in 2007 which was the last peak year to see investments of more than USD 8 billion into Indian real estate. 

Retail 

There was hardly any quality retail space noticed in the year 2015. Besides this, two big trends observed were:

  • Consolidation of retail real estate by retailers and brands who focused on their profit-making stores, and
  • The beginning of institutional investment. Thanks to moderation of sourcing standards enabling the single-brand retail companies to find more reason for exploring the Indian market and also be able to undertake e-commerce business independently.

In 2016, it is expected that there will be a rise in the number of mature investors to come and purchase built-up retail spaces. With plenty of relevant experience and foothold in our country, they will start investing in ‘greenfield’ assets. But, 2016 will face a shortage of quality retail spaces. Merchants will have to revise their real estate strategies and have a flexible approach, tailored according to different micro-markets.

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