What the elections mean for real estate?

Politics is a favourite topic of discussion across the country. And why not? It has an all-encompassing effect on us all. What happens in the higher echelons of power always percolates down to the average citizen, affecting everything from his income to his ability to buy a dream home.India’s recent economic history is one that will go down in the annals of history as being among the worst. Across India, the real estate scene has been subdued for a while now and things will continue to remain in this state of uncertainty till the highly anticipated May elections. With speculation rife on the outcome of the elections and its subsequent effect on real estate in general, the time is right to delve into some thoughts on the matter from the Bangalore perspective. Two experts in the field tell us their thoughts on questions that are today on every prospective home-buyer’s mind.Real Estate TodayBefore we actually get into the effects of the May election, an understanding of the current real estate scenario of Bangalore is in order. “There has been growth,” asserts Dr. Madalasa Venkataraman, Lead Researcher, IIMB-CRERI, “but it is slower than usual. Unlike other markets that have clearly suffered a downturn, Bangalore's fundamentals continue to remain strong. One reason for this is that Bangalore's real estate offerings are suitable for all budget ranges and there have been no price-bubbles in this market. Mid-size housing is powering growth currently, rather than high-end.”That being said, research by industry observers show that a decline of around 12% in the number of residential properties being launched across cities – Bangalore included. Most developers agree that there is a lull of sorts in the demand for residential units and that the need of the hour is to stimulate demand to improve the outlook of the sector. Currently the focus is placed on execution of projects in hand, and the launch of new ones will probably begin in the second quarter of the year, post the elections.The upcoming elections are being keenly viewed by the international investor community, which is interested in getting into the Indian market in several sectors. Anuj Puri, JLL India Country Head and Chairman believes that international investors are confident that a new government is going to accelerate the nation’s economic growth which will have a positive effect on real estate. He says, “My fear was that confidence may have abated, but that’s not the case. I’d characterize the overriding feeling as ‘dissatisfied optimism’. Short-term there’s dissatisfaction, but long-term investors are far more optimistic, given the inherent potential. India is often referred to in the same breath as China – that’s how strong the fundamentals are.”Reiterating those thoughts Dr. Madalasa emphasizes that investment potential in Bangalore city, in terms of the residential sector is quite good. “We have a proven track record of being a development-oriented city. Despite the bottlenecks, our growth story continues. Bangalore is one of the most preferred destinations for NRI investment in residential spaces.”The Upcoming ElectionsThe national elections have probably not been as interesting in the past years as it is in this one. With chances of a BJP-led coalition government coming into force speculation abounds on the consequences for the economic climate post these elections. This after all will percolate down all aspects of every industry and sector. The National Democratic Alliance (NDA) has not really made any specific policies public yet and so only speculation on two possible scenarios is possible at present.The BJP-led NDA coming to power: The belief is that it is all tied to whether the election provides stable governance or not. There are many strikes against the current government - no infrastructural growth, low GDP due to policy paralysis, impasse on decision-making, large subsidies because it is election year bringing revenue deficit to a potential all-time high and more. The sentiment in market is weak due to falling industrial/manufacturing growth. While the world seems to be moving forward, India's growth story has virtually come to a standstill.Dr. Madalasa says, “The NDA coalition is perceived to do better than most others due to Gujarat's growth model, though no one knows how easy it is to replicate the same across India. Any government that provides stable governance is likely to improve sentiment. They will need a majority and the ability to turnaround infrastructure woes. The NDA is perceived to be a strong development oriented government. So it is likely that if the NDA comes to power with a clear majority, it will spur sentiment, growth and infrastructure investment, increase real estate investment.” A Hung Parliament: For Anuj Puri, the results of a hung parliament will definitely not herald good news for the country, especially in terms of the international investor market. “Investors want conclusive action,” says Puri. “We’ve had plenty of great intent, but too much over-promise and under-delivery. Investors may currently hold off for a couple of quarters for conclusive evidence that the new government means business. If it is a hung parliament though, they will not be interested.”For everyone across the board right now it is a game of wait and watch. As to whether you should wait for the election results to make that investment in a dream home… the market still has some good deals, so if you find something worth your while, negotiate a good deal for yourself. There will be an uptick in prices soon after the elections and prices will start going up again.The way forward is entirely in your hands at the moment. You may choose bide your time till the elections or make the most of the deals on offer right now.