Outlook for real estate sector
“2018 was a moderate year for the real estate sector with various external shocks like demonetization, RERA and GST affecting buyer confidence across markets, even though the longer-term impact of these regulatory measures was seen to be largely positive. The preceding quarter also saw an IL&FS default resulting in a liquidity crisis for the financial markets, most particularly impacting HFCs and NBFCs alike. This posed a new challenge for the real estate business that has a high dependency on the availability of liquidity to fund the liability side of most lenders.
Against this backdrop, 2019 is likely to start on a moderate note with the sentiment remaining muted in the run up to the upcoming general elections. Today, 70% of the housing finance book by value is attributable to a few metros that primarily include Mumbai, the NCR, and Bengaluru. Most of the HFCs will have to wait for a rationalization of prices to drive growth whilst also looking beyond Tier I markets where housing units are still affordable. Along with the government and regulator’s efforts to revive the real estate sector, developers will also look to come up with multiple promotional offers and subvention schemes that are focused on driving a purchase decision amongst the salaried class.”
Khushru Jijina, MD, Piramal Capital & Housing Finance
“Commercial Leasing” by Mr. Pankaj Jain, Managing Director at Realistic Realtors
2018, in my opinion was the best year since 2008’s slowdown. Improving demand in Tier – I cities like Hyderabad, Bengaluru, Delhi NCR and Mumbai etc. increased the rentals and capital values between 15% to 30%. Co-working and Business Centers have been the highlights for surge in demand of office space across India. Slowdown in residential real estate also changed the outlook of Institutional investors towards commercial real estate thus the demand of re-leased properties and good developments projects also surged in 2018.
2019 also looks very promising specially in terms of demand of office space by Multi-National Corporations and Co-working organizations. Expected demand figures for 2019 if achieved, will push the rentals upwards and vacancy ratios down in most of the Cities. Grade A and consolidated office space supply will remain low in all Tier – I cities in 2019 and rental rates will continue growing in current economic scenario and infrastructure developments.
- Chairman’s Appointment:
The Bank’s Nomination & Remuneration Committee (N&RC) and Board of Directors have finalised the recommendation for Non-Executive Part-Time Chairman position and shall be promptly seeking requisite approvals from the Reserve Bank of India.
- Appointment of Independent Directors:Following the last meeting of the N&RC, 2 newly appointed Additional Directors (Independent), Mr. T S Vijayan and Mr. Uttam Prakash Agarwal attended their first Board Meeting today. The Board strength now stands restored at 8 members with only 1 vacancy.
The N&RC has also evaluated profiles for Additional Directors especially with Information Technology Expertise, to lead the Bank’s IT Strategy Committee. The N&RC will finalise the same shortly, after requisite due diligence.
- New MD&CEO appointment:The ‘Search & Selection Committee’ (“SSC”) and the Board of Directors are on track to complete the said process within the stipulated timelines of the Reserve Bank of India.
The SSC has discussed and deliberated on the final shortlisted external and internal candidates presented by Korn Ferry post their comprehensive interviews and assessment. The SSC will now engage with the candidates over the next few days for finalization. The final recommendation will be submitted to the Reserve Bank of India by the Board of Directors post their next meeting scheduled on January 9, 2019.
ICICI Bank on IIP & CPI
“Industrial production displayed a stellar performance in October, coming in at a multi-month high with most sectors showing a markedly better performance, albeit aided somewhat by a favourable base. This is welcome after manufacturing growth slowed notably in Q2 FY2019.
Electricity volume growth has re-entered double-digit territory after a gap of over two years and the consumer goods segment also gained from the favourable base, with both durables and non-durables on a healthy uptrend.Macro data also got a boost from a very benign CPI print aided by low food prices characterized by continued deflation in pulses and vegetables. There is also substantial moderation in core inflation sequentially. We expect CPI to remain below 4% till Q1 FY2020. We also expect a change in monetary policy stance to “neutral” from “calibrated tightening” in the February policy and expectations of a rate cut will now start building. However, we should remain cautious as CPI could pick up sharply towards H2 FY2020”.
– Mr. Prasanna, Head, Global Markets Group, ICICI Bank
RBI Monetary Policy
“On expected lines, the December policy review saw the MPC maintaining status quo on both key rates as well as the monetary policy stance. However, unchanged headline outcome was accompanied by a substantial revision in the underlying inflation premise.
Basis the recent downward momentum in food prices, sharp correction in crude oil prices, and stability in rupee, the RBI now projects CPI inflation between 2.7-4.2% until H2 FY20, which happens to be close to the mandated target of 4%.
While this could warrant a prolonged pause on monetary policy rate amidst some upside risks coming from both domestic (MSP, fiscal slippage) and global (uncertainty on trade, US rates) factors, the sharp change in India’s macro narrative emanating from the correction in oil prices, stability in rupee, and soft food prices needs to get incorporated in the monetary policy stance through a “neutral” outlook, indicating a need to reverse the “calibrated tightening” stance. The neutral stance on monetary policy will also complement RBI’s stated stance on liquidity neutrality, a lever which has been deployed more actively in the last 3-months.”
Shubhada Rao, Group President & Chief Economist, YES Bank