Suddenly, everything seems to be pointing to a
potential surge in Real Estate sector. Monsoon, FDI, GST, REIT, 9th Pay
Commission, ... everything seems to be only pointing to an unprecedented growth
in realty.
And what a change it
highlights: From a situation of "nothing is right" for the sector as
of Yesterday to Today's "everything is bright and sunny", the change
in perception is quite drastic.
And if these are perceptions,
so what is the reality? Quite the middling path actually. Things weren't as bad
yesterday and aren't as sunny as today.
For quite some time now,
the real estate sector has been looking for a lifeline. The downturn, lack of
funds, Issues with overcapacity and under sales in the erstwhile growth-hubs,
as well as falling prices have left the sector gasping for breath. It is a
sad situation for the industry which once was touted as the sunrise sector
along with education.
So will all the above
inputs really impact the real estate sector’s fortunes in the immediate term?
Not really!
 |
| Image Credits: www.synchronised.in |
Yes the growth will come
from FDI, REITs and others, but only in the longer term.
Surprisingly, the sector,
which has mostly been judged by the volumes in the residential segment, is
suddenly getting a boost now from a surprising quarter: Warehousing and
Logistics(W&L) segment. The numbers that have been forthcoming in this
segment are staggering and have the potential to really spur the Realty
sector.
I'd like to believe that
the real triggers for growth for W&L segment are the Government programs
like "Make in India" and "Infrastructure Development
projects", but in reality I see not enough traction from these segments as
yet on the ground level.
Surprisingly, the
catalysts are from two "unlikely" segments - Retail(or
e-Retail, to be precise) and the recent GST announcements.GST is spelt as the
real game-changer for the W&L segment with the biggies in the segment
already talking about expanding capacities. Both of these combined by the
impetus provided by Railways which is talking about humongous investments in
the W&L segment in the immediate future, are suddenly being seen as good
news for the real estate sector.
The sheer investments
envisaged are mammoth and can actually make the sector seem attractive to
investors too. The high growth optimism is already attracting both foreign
investors as well as PE firms, sensing a vast opportunity in the growth
momentum.
And there are reasons why
the investors are finding this segment more lucrative than the other segments.
There is a huge volatility associated with the residential segment, which is
not there in the W&L segment. The stability of the segment and huge lease
potential is also a sure winner for a risk-averse REIT.
According to some numbers I
have read, the demand in W&L segment is expected to touch 125 m sq ft in
the coming 5 years. The optimism could actually become an understatement, if
the indications that the Government will allow 100% FDI in eCommerce
actually come true.
"Make in India"
will also spur the Manufacturing sector demand and the requirements for the
segment will increase many-fold.
And with the growth in the
segment, the eventual beneficiary will be the real estate sector. The W&L
segment could well be the one thing that can re-write the real estate growth
story!
