The Asia-Pacific region continues to move in a forward motion as far as real estate is concerned and the trend is going to continue, according to the recent survey conducted by some topranking companies.

The Global Market Perspective report released by Jones Lang LaSalle says that the region was quickest to recover and the outlook seems positive.

In fact robust bounce back was recorded last year itself when much of the world was still sluggish. Abhishek Kiran Gupta, Head - Research & REIS, Jones Lang Lasalle Meghraj says, "Even though Europe is reeling under the fallout of the economic crisis and US is showing signs of convincing recovery now, funds are once again being routed towards the Asia-Pacific region, where India and China top the investment destinations.

The real estate implications are obvious and compelling. Both countries are heavily populated with growing economies that are spawning growth in the manufacturing, telecom , pharmaceutical, agriculture and logistics sectors. Each of these sectors will require to be housed in properties besides housing itself."

Akash Deep Jyoti, Head, Corporate & Infrastructure Ratings, CRISIL Ltd., says, "India's realty sector has maintained strong resilience in the recent financial crisis, despite slowdown in demand. Demand is expected to recover sooner in India, than in USA and European Union, spurred by economic revival."

Sachin Sandhir, Managing Director and Country Head, Royal Institutions of Chartered Surveyors also has similar views. He says, "The country is looking at a shortfall of close to 26 million residential units coupled with huge amount of urbanisation. Close to 500 million people would live in cities over the next decade, coupled with an increasingly affluent middle class with more disposable income and aspirations."

Sandhir adds, "Of late there has also been an uptake in domestic real estate fund activity. With faster returns and better yields on investment in the range of 25-30 %, most Private Equity funds are looking to place their money in residential projects." Robust real estate demand and the ability of various cities to attract high levels of FDI, which are capable of generating high rates of return are also favorable factors influencing investment, points out Sandhir.

There are other reasons as well, developers point out. Brotin Banerjee , CEO and MD, Tata Housing says, "There is an overall boost in the residential real estate market with sustained GDP growth, rising affordability, rising mortgage penetration and increasing foreign and domestic investments."

Industry analysts opine that since the GDP is slated to be at 8.5 per cent next year and the Rupee is going to grow stronger, it will bring in tremendous growth opportunity both in retail and aspirational segment in real estate.
On the other hand, Kaizad Hateria , GM Sales and Customer Relations , Rustomjee thinks that it is our strong cultural value of saving which would lead us to growth.

"Asian countries are known to be big savers of resources as well as money and there is a high emphasis on building assets. We encourage savings of upto as much as 30-50 per cent, unlike the Americans and the Europeans who believe in spending more than what they earn."

Hateria points out that our education is superior and produces a better workforce although in developed countries education is more accessible. "Hence intellectual workforce combined with better economic governance that is rather conservative, helps us to stay put and move towards steady success."

The future seems bright as the demand is humongous. "Among other factors driving recovery in India's realty sector will be the focus of developers to raise productivity through cost-cutting and use of technology. Improved transparency, ensuring protection of customer interests, and adoption of an institutionalised setup would also be seen. Increasing differentiation of good developers from other players will be a key feature of the sector over the medium term," says Akash Deep Jyoti.

While Mumbai being the financial capital would continue to see newer dimensions of growth, the wealth would start being distributed across the country, feel analysts.

The key drivers for recovery will be the demand for affordable residential projects in the Tier I and II cities, and for highend projects in the metros, especially Mumbai, Delhi and Bengaluru.

However continuous rise of prices and tremendous gap between affordability and price is a matter of concern. "In addition to this phenomenon being city-specific , the impact has been markedly different on different price segments.

Banerjee opines, price increase is largely attributed to the limited fresh supply in that particular micro market due to the land itself being scarce.

Hateria adds, "As long as the demand outstrips supply in such a huge proportion the real estate market will continue to see the cycle of ups and downs; it is an irrefutable law of economics which will play out." To continue the upward movement some drastic steps need to be taken.

"A repeat of the mistakes of 2005 and 2006 can hamper recovery. These mistakes include acquisition of land bank at exorbitant costs, raising property prices sooner than growth in economy, aggressive execution with resultant delayed or stalled projects and overleveraging of balance sheets by borrowing heavily," says Jyoti.

By and large the industry agrees that the Government has to play a very different role in keeping the momentum on. Mass housing is the government's agenda in countries across the world, says Gehi adding, "The Government must incentivise development by waiving off development charges and reducing stamp duty and registration costs. There needs to be an exploration of public private partnerships which should be scaled up rapidly so as to match the demand for affordable housing .Robust policies and bringing dynamic laws too are important."

Infrastructure subsidies on developing township, clarity in policy and guidelines for FDI in township projects and development of physical and social infrastructure are other factors that would ensure growth feels the industry.

Source: ET