Residential real estate to be a key beneficiary of RERA
About 900 commercial assets equalling 280 million square feet are currently available across key cities and awaiting deployment into India's real estate investment trusts (Reit) market. The first Reit listing is likely towards the end of this year and the biggest impact will be on commercial assets, according to a report released by global real estate services firm JLL and Confederation of Indian Industries (CII). Institutional investors and high networth individuals (HNIs) will look keenly at commercial markets, said the report. In the residential segment, projects with smaller unit sizes will witness more traction than projects with larger unit sizes, it said. Also, with the implementation of Real Estate (Regulation & Development) Act (Rera), there is likely to be a reduction in new launches across all cities as only those developers confident of meeting timelines will undertake new projects. With lesser new launches and a simultaneous dip in unsold inventory, there will be a steep appreciation in capital values, said the report. Capital values will rise across all cities in the near term, keeping in mind the inflation delta. In the National Capital Region, however, where there is an oversupply, there will be stability in capital values. Post Rera, major developers are likely to enter into joint venture partnerships or undertake joint development with smaller developers to complete stalled projects. Transparency in the market is expected to increase. Home loan rates will look soft in the near future and this will give a boost to residential markets. Office markets continued to look attractive with Bengaluru showing the lowest office market vacancy rate of 3.2% among all the top seven Indian cities in Q1 2017. Bengaluru and Mumbai accounted for 60% of the total absorption during the quarter. IT/ITeS sector revenues were under pressure due to increase in wage costs, appreciating rupee and changes in the industries to which the Indian IT sector caters. However, with IT/ITeS companies looking to reskill employees, changing towards 'Agile' model of software development and looking for alternative areas of growth, we feel that the impact on space requirements will be marginal, the report said. The impact of Trump's policies on hires in the US is minimal as per the report. On the real estate front, there has been no immediate change in terms of Request for Proposals (RFPs) floating in the market or the share of the IT sector in leasing or the type of buildings presently being built by developers. Also, India continues to be a cost-competitive market versus its other counterparts, which is a critical strength. The report said that India's offices and workspaces will witness a counter-balancing of the effects of global economic vagaries, Trump'onomics, automation and dividends from India's policy reforms and demonetization.
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