Residential segment to revive in Q4 of 2014

With the Narendra Modi-led government focusing on reviving growth and bringing down interest rates, sale of residential properties is likely to pick up in the last quarter of 2014, a recent survey said.
Due to low consumer confidence during last year and even in the first half of 2014, residential property absorption levels reduced significantly resulting in an increase in inventory levels and correction in prices, according to ratings agency Care Ratings.
"Stable government at the Centre has already brought optimism in the country. As the new government wants to focus on reviving growth, the interest rates are expected to decline in the near future.

"The government has also announced reduction in the exemption limit on account of interest on loan in self-occupied property. Based on these factors sales of residential units are expected to pick up from the last quarter of this year," the agency said in its report.
2013 was not good for the Indian real estate sector on account of weak macro economic conditions and lower confidence levels in the country, it said.
"Rising inflation combined with high borrowing rates as well as slow growth in income and job levels impacted the consumer spending. Continuance of these issues in the first half of this year and the uncertainties related to general elections resulted in continuance of low consumer confidence," Care said.

Developers faced liquidity challenges as banks were reluctant to lend to the sluggish real estate sector and drying up of other sources of finance such as FDI and PE investments resulted in increase in cost of debt for them.

"On one hand, for the buyers, there was a steep hike in EMIs and on the other there was an increase in costs of construction and debt for the developers," it said.
Expressing optimism in the sector, the agency said deeper penetration of existing banks as well as upcoming banks will increase the exposure to home loans.
Further, with rapid land and infrastructure development as well as improved standard of living in tier 2 and 3 cities, housing demand is likely to increase more in these cities.