FUNDAMENTALS OF REALTY SECTOR REMAIN STRONG
Real estate industry has seen a great turnaround in the past two years. A confluence of factors such as bottomed out prices, sweetened deals from developers, interest rates at decadal lows and above all, the strong sentiments and emotional value around homeownership resulted in a robust rise in both new launches and rate of absorption in the residential real estate segment. Consolidation in the industry got accelerated during the last two years. While this brought several NBFCs/ banks back to lend to real estate, this also led to the return of several offshore institutional investors after more than a decade of staying away from residential real estate. Despite all the positive developments in the last two years, the world is going through a rather painful phase due to rising inflation. The Russia-Ukraine war and the recent rise in the price of crude oil has led to rise in prices of raw material utilized in real estate like steel, cement, aluminium, PVC etc. Such key raw materials have become 30- 60% costlier, as a result of global supply chain constraints. On top of this, RBI for the first time in years has increased repo rates which in turn will make mortgage loans slightly expensive. We, however, believe that the increase in raw material prices is a temporary phenomenon. Fundamentals for the real estate sector remain strong and demand will increase over the next two to three years, as it enters a growth cycle that is mainly consumption driven.
Tags : SHARAD MITTAL DIRECTOR & CEO OF REAL ESTATE MOTILAL OSWAL (MORE) REALTY SECTOR Strong