Contact Us | Log In
Search
Sensex: 33345.1 +94.80 Gold: Rs.28527.00
Nifty: Silver: Rs.37061.00
Changing growth phases in real estate market - IndiaNotes.com
Changing growth phases in real estate market
Guest Author | Published: 19 May, 2017  | Source : IndiaNotes.com


Alike any other business, the real estate sector has also experienced its highs and lows. Worldwide economic slowdown, fall in property demand, government policies and such other factors impact the real estate business to a great extent. Being the second largest employer in the country, after agriculture, real estate business impacts not only property buyers but also the employment of millions of people. Residential properties, commercial buildings, hospitality and retail establishments are the main segments of the real estate sector in India. And, over the last decade, the real estate sector has undergone different growth phases. The growth phases were mostly determined by the emergence of the Information Technology sector, demand for office spaces, growing corporate business, urban and semi-urban accommodation, and evolving commercial and retail spaces. Here is a quick overview of the changing growth phases in real estate market.


I.    Initial growth phase – The period from 2001 to 2005 is considered as the initial growth phase of the real estate market. This phase is majorly attributed to the rapid growth spurt of IT companies. In addition, this phase saw a rise in urbanization, growing trend in nuclear families, and high purchase power of consumers. This encouraged people to buy a house during this phase. Along with good supply and demand ratio, the increase in Foreign Direct Investment (FDI), led housing and finance companies to offer attractive loan options including the introduction of various schemes by the government to promote the growth of the real estate sector. This phase also witnessed a considerable rise in employment leading to increasing urban population resulting in a shortage of housing in many cities. Also, there was an increase of employment in the real estate sector itself, especially in the construction category.


II.    High growth phase – The period from 2006 to 2008 is considered as the high growth phase in the real estate market. Government policies such as removal of cap and permission of 100% FDI increased foreign investments and also the advent of many foreign property developers. In addition, low-interest rates, home loan benefits, the rise in disposable income, the growth of the middle class and youth, and increased urbanization marked the high growth rate of the real estate sector. However, the share of real estate in GDP fell during this phase as the industry’s growth was not proportional to the growth rate of the country.


III.    The decline in demand and supply – The period of 2009 to 2010 is marked as the slowdown phase of the real estate market. The main contributing factor was global economic recession which led to a severe liquidity crunch and decline in affordability. The drop in affordability led to a drop in demand leaving around 600 million square feet of supply for residential space in 10 major cities namely Mumbai, Delhi-NCR, Bengaluru, Chennai, Kolkata, Ahmedabad, Chandigarh, Pune, Hyderabad, and Kochi.


IV.    Increased supply but decreased demand – The period of 2011 to 2014 witnessed a mismatch in the supply and demand of properties. Post the slowdown phase it was expected that demand for properties will increase. However, high property prices, higher loan interest rates, and cautious perspective of buyers resulted in the decline of demand especially in the residential segment of real estate sector. On the contrary, there was a substantial growth of supply of housing mainly in the urban areas.


V.    The increase in unsold inventory –The effect of the previous phase trickled to this phase and the real estate sector was left with a huge number of unsold inventories. There were lakhs of property for sale across the country. This impacted all major property developers and builders too.


However, the year 2017 comes with a new promise for the realtors as well as buyers that will contribute to the growth of this sector, all over again.

 



About Guest Author
Guest Author