Growth momentum to hurry

Policy changes for the better, low-interest rate regime, end of high inflationary levels and a stable polity may help the realty sector hasten its growth as well as undergo an image makeover by ushering in more transparency and accountability.

The real estate boom in India is completely linked to the country’s economic growth, which has made India a preferred investment destination in the world. India is now the third-largest economy by purchasing power parity, next only to the US and China, and is heading towards becoming the second-largest, driven by many factors including entrepreneurship, rising income level, robust infrastructure growth and the overall emergence of India on the global stage.

With great demand for housing for India’s huge population and for commercial and industrial premises for its booming economy, large-scale real estate projects have become a regular feature across the whole country. This has transformed real estate into one of the fastest-growing sectors in the country and the second-largest employer in the county after agriculture.

Sensing the potential, it has attracted venture capital and diversified sources of funding including overseas and private domestic funds and private equity funds.

Before drawing a picture of what to expect in 2014, let us figure out major developments and lessons learned in 2013.

India’s real estate market witnessed a subdued economic environment almost throughout the year as the country’s economy remained under stress due to both local and global factors.

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Inflation remained a matter of concern during most of the year which had a bearing on the projected growth for the real estate sector. We also witnessed a sharp drop in the rupee’s value against the dollar. It is an altogether different matter that opinions are divided on the impact of this drop on the sector. And, by the last quarter of the year, the policy environment seemed to have been paralysed due to unjustified public trial of even honest bureaucrats.

• India is now the third-largest economy by purchasing power parity, next only to the US and China, and is heading towards becoming the second-largest, driven by many factors including entrepreneurship, rising income level, robust infrastructure growth and the overall emergence of India on the global stage.
• Real estate is one of the fastest-growing sectors in the country and the second-largest employer in the county after agriculture.
• Inflation remained a matter of concern during most of the year which had a bearing on the projected growth for the real estate sector.
• A lower interest rate regime will provide much-needed respite to the real estate sector.

These four factors occupied a major part of public discourse on the Indian real estate sector and forced the developers to realign their projections.

The introduction of the Real Estate Regulatory Bill in Parliament and approval of the Land Acquisition Bill will go a long way to streamline the process of land acquisition and approval of projects which will ultimately help the sector to bridge the image deficit and bring complete transparency and accountability.

When we launched our maiden project this year, we ensured that our project adhered to all the provisions in the Bill. Once these bills are enforced as a law, it will also help to create a stable and reliable environment to attract large-scale investment.

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With the record retail inflation registered for November 2013, we are set to enter 2014 with a high-interest rate regime, though it is expected to come down by the end of December. This will bring cheers for all as RBI will move ahead on the path of policy rate correction. The end of a high inflation cycle will bring smiles to the face of the people of our country too whose lives were severely affected by rising prices of essential commodities throughout 2013. A lower interest rate regime will provide much-needed respite to the real estate sector. The RBI team led by its Governor Raghuram Rajan needs to be praised for stabilising the rupee despite fighting battles on the two fronts (inflation and rupee-dollar relationship) simultaneously. Their concern for growth was evident in the way they opened short-term liquidity support to the system. When the intentions are right, the result ought to be positive. Coming to the political scenario, the country is going to decide on the next government at the Centre. Given the slowing economy, this general election will be fought on development issues and whosoever party forms the government, they will have to bring in emergency measures to bring out the economy from a deep slumber. Overall, we expect 2014 to bring good news for not only the real estate sector but for the people of this country. In tune with our country’s growth momentum and the time, we also plan to launch our next project this year.

(The writer is Managing Director, Microtek Infrastructure)

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