The year 2012 closed with a few positive notes as inflation was below projected levels and growth in industrial production gave new hope for 2013. Overall, 2012 remained inactive, affecting major sectors in real estate. With the expected moderation in inflation and strengthening policies, here are a few interesting insights for 2013.
- Economy – As per the Reserve Bank of India (RBI), 2013 will focus towards growth, although risks of inflation will continue to remain. Interest rates are expected to soften in 2013.
- Policies – The few policies likely to benefit the real estate sector in 2013 are: the Real Estate Regulation Bill, real estate investment trusts (REITs) and the Land Acquisition and Rehabilitation and Resettlement Bill.
- Infrastructure – In 2013, the relaxation of foreign direct investment (FDI) policies in multi-brand retail and a 100% FDI permitted under the automatic route in built-up infrastructure, is likely to boost development in this sector.
- Office Real Estate – Absorption in 2013 is likely to remain stable. Rents are expected to increase from 2H13 onwards. Decisions on occupying special economic zone (SEZ) spaces will be taken by occupiers as they have to go live by March 2014 to avail the benefits.
- Retail Real Estate – The relaxation in FDI policies in multi-brand retail, has interestingly, boosted aggressive growth amongst Indian retailers. In 2013, retailers are likely to opt for built–to–suit (BTS) options or high-street properties amid constrained supply of good quality malls.
- Residential Real Estate – The framework of REITs once formulated, is likely to drive investor demand in rental housing. In 2013, residential units in the range of INR 3,000–5,000 per sq ft in prime cities are likely to see fast sales.
- Industrial Real Estate – Sale-cum-leaseback of existing industrial assets is likely to increase in 2013. Growth in e-retailing and FDI in multi-brand retail is expected to increase the demand for warehouse space in 2013.
- Education and Healthcare – There are aggressive growth plans in education and healthcare infrastructure in 2013 and are expected to attract private equity investments.
- Investment Sentiment – Debt capital is expected to increase. Assets will witness a compression of yield rates amidst increased liquidity.
- Delhi – Office absorption is likely to focus around Gurgaon and Noida. Rents are expected to increase in certain sub-markets due to supply constraints by 2H13. Developers will focus on delivery of the residential products.
- Mumbai – Office absorption and residential demand will increase. Residential launches will increase but a price fall is unlikely to happen. There will be constrained supply of quality retail malls and they will earn premium rates in 2013.
- Bangalore – The most preferred destination for office space will be Outer Ring Road and for residential real estate will be North Bangalore in 2013.
- Other Cities – Residential launches are likely to increase in Kolkata and Hyderabad in 2013. Prices of residential units are likely to increase. Ahmedabad, Bhubaneswar, Kochi and Coimbatore are likely to witness enormous development in 2013.
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