While the global outlook is disconcerting, it has brought in good tidings in the form of nearly $60 billion of savings owing to sub $30 oil prices. However, our stock markets indicate that the near-term outlook for India is yet to see a revival. The Sensex is at the same level as when our current PM assumed office. The manufacturing indices have slipped below levels that would have indicated a positive trend. The economy is on the mend but recovery is delayed.
According to reports on real estate trends, sales volumes dropped and new launches have plunged. Amid large-scale delivery defaults, slow sales and huge unsold inventory, residential real estate remained in the slow lane, like last year. Luxury real estate was badly hit, though the affordable housing segment did gain some ground with sales of residential units from Rs 50 lakh to Rs 1 crore, seeing maximum traction. However, the infusion of private equity into e-commerce led the boost of office space absorption to 3.5 million sq ft, the second highest after 2011, with rise in rents across cities, especially in certain segments in Tier-I cities. The year 2016 is expected to see a continuation of the increase in demand driven by IT and ITES.
Change is in the offing. The consumer movement has seen success in beating the dogmatic attitude of the super-rich-and-powerful club. Around a third of over 25 lakh apartments launched between 2008 and 2014 were delayed by at least a year, according to property research firm Liases Foras. Of the total space of 3.2 billion sq ft under construction across 25 cities, about 34 per cent of the space valued at Rs 165,064 crore (1.32 per cent of GDP) was delayed by over a year. But consumers are being empowered. Their ire recently saw the courts order the promoters of the Unitech Group to be held behind bars. The Competition Commission of India (CCI) has even filed first information reports with the police where fraud was involved. Although it has been provided a foreign equity bonanza, waiver of entry and exit barriers, raising of approval limit for the Foreign Investment Promotion Board limit from Rs 3,000 crore to Rs 5,000 crore, doing away with area restrictions of 20,000 sq m and capitalisation of $5 million, besides allowing investment repatriation before project completion with three-year lock-in, governance is what this sector clearly lacks. The real estate bill will provide some correction.
On the infrastructure front, Nitin Gadkari, Minister of Roads & Highways, said the pace of road building, which is at 18 km a day at present, will reach 30 km a day by March and projects worth Rs 1.5 lakh crore would start by March. While he did make tall claims early on, one has seen there is some semblance of truth in his claims. He has taken on the 19 stuck highway projects and is finding solutions. The projects have been grounded owing to various problems, including cost escalation, non-viability and rows between bankers and concessionaires. The cost of these stalled projects, which are threatening to pile up the non-performing assets of banks, is at least Rs 30,000 crore, with some of them having cost escalation of up to 30 per cent.
The Budget throws open yet another opportunity for the government to undertake transformational reforms. This does require a switch in policy, which can trigger a landslide win. The black money policy has been a dud and even the gold bond does not seem to have the muscle to restrain imports that are unnecessarily draining our forex reserves.
Activity will pick up pace in February, beginning with the smart cities kickoff. The US Smart Cities Infrastructure Mission will be at the 3rd SM@RT CITIES SUMMIT on February 10-11, followed by several delegations converging for the ´Make in India Week´ in Mumbai. It is likely that we get some large commitments from international companies to source manufacturing from India. Finally, it will be over to the FM who will reveal what the Budget holds for the year ahead – I only hope I get to hear the word ´transformational´ more than ´deficit´ during the Budget sessions on TV.