Mumbai: India’s realtors see a booster shot for the segment, from renewed home buying and government infrastructure contracts, after the ruling coalition got a near-majority in the general elections over the weekend.
Realtors have faced a severe cash crunch over the last nine months as the global financial crisis squeezed liquidity and high prices kept buyers of homes, offices and shops away.
New projects have since been put on the backburner while many of those under construction are delayed, especially commercial.
India’s Congress-led coalition defied predictions of a tight race and was only 10 seats short of an outright majority, sending shares up for its biggest one day gain in almost two decades on the first trading day post election results.
But revival in corporate spending is still some while away, real estate developers and infrastructure firms said.
“Just because things have improved today, we wont go and look for more office space tomorrow. We’ll wait and watch,” Ravi Ramu, chief financial officer, Puravankara Projects Ltd said.
“Whereas if you want to buy a house, you’ll say today, things are not so bad, my job is not in jeopardy, let me buy that house before prices go up,” he added.
“Housing has to come. And affordable housing comes into more significance.”
Affordable housing is “seriously undersupplied” in India, according to a Goldman Sachs report which said more than 30 million units are needed because of growing urbanisation.
Since 9 March, India’s realty index has risen over 140% till date from its year low of 1,297.82 points.
The new government should mean quicker policy implementation and less excuses on execution, needed to help bring back funding for the country’s crippling infrastructure projects and slowing housing sector, say builders.
“Order inflow will come in very fast now. In my opinion, in a month,” H.S. Bharana, managing director and chairman of Era Infra Engineering said. “I think in 2-4 months we will come though some equity also,” he added.
India’s infrastructure growth has smarted as private investors shy away from the frequently-changing bid norms of the country’s long-gestation projects and grow more risk-averse.
Only 146.6 million sq. ft. of commercial space will come up by the end of 2011, according to property consultant Jones Lang Lasalle Meghraj, as opposed to the total 172.9 million sq. ft. announced for completion over the next 3-4 years.
Last fiscal year, bids came in for just 22 of the 60 highway projects offered to private firms to build and operate.
“There should be enough government action in deciding what to reform,” said Gurjeet Singh Johar, chairman of road builder C&C Constructions.
“The real change is there would be improved liquidity because of a stable government,” said an analyst from a local brokerage. Foreign investors would be more interested in the country and promoters more willing to sell stakes as valuations improve.
Last week, DLF, India’s largest listed developer, raised $783 million through a share sale. In April, developer Unitech raised $325 million through a share placement.
Still, the new government faces a widened deficit, slowing growth, falling exports and factory output and huge expectations for fresh stimulus to protect their growth and jobs.
“The economic scenario has not changed, the political scenario has,” Sarang Wadhawan, managing director of Housing Development & Infrastructure Ltd, said.