Indian real estate market on road to recovery, report says

Improved liquidity, softening interest rates and price corrections have combined to create a positive outlook for the real estate industry in India, according to a new report.

The latest analysis from Ernst & Young indicates that the market is well on the way to recovery with the residential sector leading the way.

‘After a rough phase that lasted for over a year, the Indian real estate industry is on the path of recovery.

The residential real estate segment, which is leading the recovery, has witnessed a revival in demand, primarily due to improved affordability,’ the report says.

The fact that developers are focusing on self funded projects has created more confidence and their improved balance sheets has led to more projects being launched.

They are also concentrating more on affordable projects rather than luxury developments which are still hard to sell in the current economic climate, the report says.

But the commercial, retail and hospitality sectors in India are still struggling due to the subdued demand from the IT/ITeS sectors and multinationals, which are halting expansion plans in the country.
 
‘In the aftermath of the global economic slowdown, most retailers have put off their expansion plans in India, since the slowdown has resulted in a decline in their revenues and profitability,’ analysts say.

Developers have also moved away from hospitality projects that have higher gestation periods.

‘This has resulted in the widening of the demand-supply gap in hotel rooms in the country,’ the report adds.

Delhi is named as the most preferred destination for real estate developers and investors.

‘The key factors that have helped Delhi to retain its number one position are the fast-paced improvements in physical infrastructure such as the metro railway, modernisation of the International airport, road widening projects and dedicated efforts to make the ring road signal free,’ the report points out.

Mumbai comes a close second but looses out on infrastructure.