India Real Estate Report Q2 2012 - new market research report

London 5/17/2012 10:05 AM GMT (TransWorldNews)

The price of this market report covers 4 quarterly reports on this sector. This quarterly report will be downloadable instantly as a PDF document, with the 3 remaining reports delivered at regular intervals throughout the year.

In late 2011, BMI conducted its latest round of interviews with in-country sources on Indias commercial real estate sector. The outlook is subdued for 2012, although our sources do predict very slow growth across the board. This outlook supports the current fears over Indias major developers debt levels, rising raw material costs and renewed economic crises in the US and eurozone.

There are a few bright spots on the horizon, not least of which is the stability exhibited in the city of Bangalore when Indias other major cities are seeing an oversupply of both office and retail property.

Bangalores steady property price increases over the last two years are set to continue amid a bleak outlook for the market in the rest of the country. In particular, demand for retail property is not sufficient to match existing supply, which has caused delays and adjustments to a number of major retail projects in the pipeline. A pick-up in investment from non-resident Indians (NRIs) as a result of the depreciating rupee is unlikely to bolster a period of subdued investment and minimal construction.

Economically, India is in the midst of a cyclical slowdown which we envisage will last for a few more quarters. We are currently forecasting FY11 (ending March 31 2012) GDP growth of 6.8%, significantly lower than the levels seen in 2010 and 2011. Industrial production growth has stalled (which may have detrimental ramifications for the industrial real estate sub-sector) and Indian consumers are tightening spending. In the short term we believe the Reserve Bank of India is unlikely to revise its inflationary stance, providing little incentive for spending. Our below-consensus outlook does not see economic growth bottoming out until mid-2012 at the earliest.

Key Opportunities In The Real Estate Market:

- State governments and bodies like the Confederation of Real Estate Developers Associations of India (CREDAI) are hoping to crack down on unlawful and potentially dangerous construction practices with new requirements and increased transparency.

- Bangalores resilience in the face of economic and international uncertainty bodes well for there to be continued development and investment in the area.

- Although the depreciation of the rupee has slowed local investment, reports suggest that interest has increased from NRIs (especially in Bangalore) who may also lead a surge in foreign investment.

Key Risks To The Real Estate Market:

- Fears remain over major Indian companies debt levels and whether interest rates will increase while they try to reduce them over the next year or so.

- Current reports suggest a major oversupply in both office and retail premises, causing delays to upcoming projects and risking a slowdown in the sector while constructors must wait for demand increase.

- Raw material and labour costs have been increasing since September 2011, which could slow construction and cause developers to reduce the number of projects they wish to invest in until levels stabilise.

- The higher costs mean that developers with vacant space cannot afford to lower their rental levels in order to entice renters into their premises.

Click for Report details:India Real Estate Report Q2 2012

 

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