Real Estate Insights For 2013

Main Arrival at Ireo Gurgaon Hills

Main Arrival at Ireo Gurgaon Hills

The year 2012 rounded off with some positive moves in the economy. In 2013, the relaxation of FDI policies in multi-brand retail is expected to surge the investment in back-end infrastructure development such as logistics. Office space absorption in 2013 is likely to remain same to that of 2012. Supply correction will lead to fewer options for occupiers, and steady absorption will decrease vacancy levels. Competition for space in buildings at prime locations is expected to increase in 2013, and these space will start earning a premium. Real Estate Investment Trust (REITs) in India allowing investments in rental housing is a new trend worth looking out for. The framework and details of REITs, once formulated, are likely to drive the investor demand across the prime cities in India. Another interesting trend observed in the last two years was that the stock in the range of Rs 2,000—3,000 per sq ft was sold out fast. In 2013 this range will shift to Rs 3,000—5,000 per sq ft.

(Financial Times, Page 2)

Economy

Economy to grow by 5.5% this fiscal: Chidambaram

Finance minister P Chidambaram on Thursday exuded confidence that the economy would grow by 5.5% in the current financial year and improve to 6% in 2013-14.

“Today eurozone crisis is still continuing, recession in Europe, Japan and Brazil… naturally these affect us. Still our economy has been witnessing growth and this year it will be 5.5%,” Congress sources quoted Chidambaram as having said during pre-budget consultations with party leaders at the AICC headquarters.

Chidambaram expressed optimism that the country would come out of the low GDP growth and see 6% in 2014 followed by 7% growth rate leading to 9% gradually.

He sounded confident of achieving 5.5% in 2012-13 despite Central Statistical Organisation place the figures at 5%. The economy grew by 6.2% in 2011-12 and 9.3% a year ago.

Observing that the Indian economy was hit adversely by the global financial meltdown of September 2008, Chidambaram said that the stimulus packages provided by the then finance minister Pranab Mukherjee had helped in recovery.

Chidambaram also emphasised that there should be a balance between the welfare schemes and the need to promote growth as without it would not be possible for the government to fund social sector programmes.

Read more: Hindustan Times

Inflation skids to 3-year low of 6.62% in January

Wholesale price index (WPI)-based inflation for January touched a three-year low of 6.62 per cent, down from 7.18 per cent last December.

The fall of WPI inflation — the main gauge for inflation in India — is expected to give the Reserve Bank of India more elbow room to effect another policy rate cut in March, say economy-watchers.

Annual WPI-based inflation was 7.24 per cent in November 2012 and 7.23 per cent in January 2012. Core inflation for January 2013 came in at 4.1 per cent, lower than 4.2 per cent in December 2012.

Diesel effect

The diesel (administered) price increase on January 21 is understood to have impacted headline inflation by 10-12 basis points.

C. Rangarajan, Chairman of the Prime Minister’s Economic Advisory Council (PMEAC), said inflation movement in January was in the right direction. The PMEAC hopes overall inflation to trend down to 6.5 per cent by end March. There will be further softening of inflation in the coming months, according to Rangarajan.

Read more: Business Line

Surplus cash: govt to borrow less in 2013-14

The government is likely to borrow less in the new fiscal year that begins on April 1 than in 2012-13 because of its surplus cash balance, two government sources said on Monday.

Lower government borrowing could help bolster India’s growth prospects by reducing borrowing costs for private investors and facilitating a pick-up in capital investments, which are projected to hit at least a five-year low this fiscal year.

The government has built up a cash surplus of Rs. 80,000 crore as a result of deep spending cuts to keep the fiscal deficit down at 5.3% of GDP this fiscal year. The government has set a target of cutting its fiscal deficit to 4.8% of GDP in the next fiscal year.

India ranks 14th on budget transparency

The transparency in the Indian budgetary system has improved marginally and is ranked 14th among 100 countries, a survey has said. According to the ‘Open Budget Survey 2012’ released on Thursday by the International Budget Partnership, India’s open budget index (OBI) score improved from 67 in 2010 to 68 in 2012.

Its open budget index score of 68 out of 100 is much higher than the average score of 43 for all countries covered in the Global Open Budget Survey 2012, it said.

The survey is released every two years and India’s OBI score during 2008 was 60.

India continues to occupy the same rank as in 2010. However, its score, which is based on various parameters largely relating to availability of budget information, is the highest in South Asia.

According to IBP, India’s current score indicates that the government provides significant information on its budget and financial activities during the year, enabling Indian citizens to hold the government accountable for management of public money.

Finance minister P Chidambaram is scheduled to present the Budget on February 28.

The survey showed New Zealand, with an OBI score of 93, provided the most information on budget, followed by South Africa (90), the UK (88) and Sweden (84).

Markets

Gold demand down for the first time in 3 years

Global gold demand fell last year for the first time since 2009 as jewellery buying abated in the key Indian and Chinese markets and US and European coin and bar investment dropped, the World Gold Council said on Thursday.

While gold consumption is expected to stabilise this year, it may be some time before it revisits record levels seen in the depths of the financial crisis, the WGC said.

“It’s hard to see a major move up in demand (this year),” the WGC’s MD for investment, Marcus Grubb, said.

“Demand will remain high, but we’re talking small single-digit numbers in terms of growth from the current tonnage level.”

“The tonnage last year was 4,405 tonnes for consumer demand, and if you add in over-the-counter demand, it’s another 100 tonnes higher,” he said. “We would expect 2013 to be quite similar to that.”

Grubb said he sees gold prices, which have traded between $1,625-$1,695 an ounce this year, staying within their current trading range, although potentially market-destabilising events such as upcoming US budget talks could push them higher.

Gold is down 1.4% this year after posting its biggest quarterly drop since 2008 in the last three months of 2012.

Rupee down 12 paise against dollar in early trade

The rupee declined by 12 paise to 53.94 against the dollar at the Interbank Foreign Exchange market in early trade on Thursday on fresh demand for the American currency from banks.

Forex dealers said fresh demand for the US dollar from banks mainly put pressure on the rupee but a higher opening in the equity market restricted the loss.

The rupee had edged up by just three paise to close at 53.82 against the US dollar amid mild dollar selling by exporters in Wednesday’s trade.

Meanwhile, the BSE benchmark index Sensex rose further by 19.71 points, or 0.10%, to 19,627.79 in early trade on Thursday.

Retail

Retailers expansion activity up in 2012 despite 83% drop in retail space supply

Despite an 83% drop in supply of organized retail space across key cities in the country, the year 2012 continued to witness an increase in transaction activity and retailer expansion, showed a report from global property consultant CBRE.

Around 2.5 million sq ft of fresh retail space entered the market in 2012, mainly concentrated in Bangalore, Kolkata and Pune, as against over 15 million sq ft in 2011, the report said.

“Despite the large dip in prime retail space supply across key cities last year, the good news is that retailers continued with their expansion plans. This positive sentiment is indicative of retailers taking a long term view of the Indian economy despite the short term struggle,” Anshuman Magazine, Chairman and Managing Director of CBRE, South Asia.

The government’s move of allowing FDI in retail has further contributed to this positive sentiment, he added.

Developers remained focused on attracting tenants in completed properties and reducing existing vacancy levels, rather than focusing on launching new projects. Most of the supply pipeline is scheduled for completion in 2013; by when the existing vacancy levels might reduce, the report said.

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