Realty market to witness greater M&A activity: Rohtas Goel

Realty market to witness greater M&A activity: Rohtas Goel
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First Published: Fri, Jan 23 2009. 04 04 PM IST

Updated: Fri, Jan 23 2009. 04 04 PM IST
Amir Hashmi, Correspondent, HT Estates speaks exclusively to Rohtas Goel, CMD, Omaxe Ltd on the sidelines of Clarity Through Debate conclave
The RBI’s move to cut the cash reserve ratio (CRR) thrice in quick succession is expected to help revive the real estate market and bring about an element of stability.
We believe that the economy will rebound again and recent cuts in CRR and repo rates and government tax rebates are already bringing in positive sentiments among investors. This step announced is favorable for affordable housing in suburban areas and not prime land.
The real estate sector is heading towards being the favorable for end-users. For instance, we have already announced to offer 1-5% discount on the basic sale price of existing projects and 5-10% discount to customers for any new project.
The percentage will depend on the project size, type and location. However, the cut will be for customers who pay on the basis of the progress of construction at the project.
Input costs
The 4% Cenvat cut will have a positive impact on realty sector. It is expected that prices of most of input products like cement, steel, etc would come down.
The reduction in prices of these products would benefit the real estate sector, where steel and cement are significant cost components.
This cheaper resulting input cost will further relieve the rising pressure on the developers.
Also at a time when realty sector is facing a cash crunch, private equity firms have committed to infuse funds into the Indian real estate sector.
Some especially depressed markets are already beginning to see slightly improving conditions and should see increased home sales through the summer.
Residential segment
The residential segment is heading towards being favorable for end-users.
In Tier II and III cities, this segment is seeing a complete image makeover with increase in demand for designer housing, condominium, group housing etc. In Tier I, the demand for boutique and luxurious properties is on a rise.
In the current scenario, Tier-II and III cities still offer a good deal in terms of potential price appreciation, which is driving the investment and growth phase of the country owing to the huge unexplored potential in these cities.
The growth in these projects has found a boost due to easy access to housing finance, multiple and affordable real estate options and lifestyle properties.
Cities like Bhiwadi, Faridabad, Ghaziabad, Noida, Gurgaon, Sonepat, Ludhiana, Lucknow, Chandigarh, Guwahati, Bhubaneswar, Jaipur, Ahmedabad, Surat, Nagpur, Indore, Goa, Vishakapatnam, Mysore, Coimbatore, Kochi and other state capitals are some of the emerging hot residential destination in India.
While a large number of end users are buying homes, there are also significant numbers of investors who are going in for residential property purely for the purposes of future returns.
Global funds
The current turmoil in Indian market is largely driven by global markets sentiment. We at Omaxe feel that the main challenge lies to gear ourselves in terms of reducing financial dependence on global funds.
Talking about the growth factor, it cannot be negated that this sector still shows a favorable growth rate, although the pace has taken a little beating.
We believe that the real estate sector still holds the prime importance as the most lucrative investment option on long-term basis and will continue to hold the same position.
Residential would be the most beneficial sector from real estate in near future followed by commercial, office space or any other.
Consolidation
Real estate slowdown has resulted in a lot of struggle ahead for mid-size developers with small projects. Going forward, we expect the Indian real estate market to witness greater M&A activity driven by consolidation and the growing maturity of the market.
This activity would ideally be supported by requisite regulatory framework and inherent attractiveness of the real estate sector, which in turn will be based on sound market fundamentals and relatively stable economic & political regime.
We believe that the Indian real estate will continue to remain a good medium for long-term investment and FDI in real estate sector will take a rise in coming time.
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First Published: Fri, Jan 23 2009. 04 04 PM IST