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The year 2012 has been a challenging one for Indian economy. Although the 2011-12 financial year started on a positive note, it got bogged down as the monetary tightening continued to arrest the inflationary pressures. With inflation rate being checked to a certain extent and Reserve Bank of India softening cash reserve ratio, 2013 economy is forecasted to improve. The second half of 2013 is pegged to see growth in the real estate sector.

Housing prices have soared much higher than the reach of average Indian in the past decade at an annual rate of 14%. However, price appreciation has slowed significantly during 2012 in the top seven cities of the country, where capital value has gone up by only 1-3 percent. Owing to sluggish sales and increased holding and construction cost, the real estate scenario has found itself in deep waters.

The coming year holds possibility for home prices coming down. The Finance Ministry took serious notice of an estimated 80,000 unsold houses under construction in the Mumbai Metropolitan Region (MMR) alone and urged the developers for a price correction. Confederation of real estate developers association of India (CREDAI) responded to the concerns voiced by the government and CREDAI has asked the developers to consider selling maximum number of units at discounted price.

Although most of the cities of India will see an increase in residential launches in 2013, the southern cities of Bangalore and Chennai will witness a decline in launches as compared to 2012YTD. It is important to note that these two cities recorded a historical high in terms of the number of launches during 2012.

As an example, Pune has recorded an average of close to 6000 units per quarter over the past three years. This is more than twice the average quarterly launches recorded during the period 2007-2009. As a market that has grown too fast in such a short time, launches in Pune will be moderate in the near term.

Developers will also offer buyers attractive pre-launch benefits in a bid to accelerate sales momentum in the initial months following a launch. Developers with large-scale projects with a greater share of unsold inventory will be under greater pressure to offer discounts than those with smaller projects and limited inventories.The previously offered freebies and other incentives by the developers are not expected to revive the falling home sales. Along with price correction, there is a possibility of innovative payment schemes and pre-launch benefits will be offered to the buyer. Big developers with massive inventories will be under pressure to offer discounts, so that they can sell off maximum number of units. Although launches have come down by 50% in most of the Indian cities in the past four quarters, residential launches are predicted to be on the rise in 2013.

The availability of debt capital in housing sector is likely to increase while the flow of equity capital will remain stable in 2013. With Securities and Exchange Board of India (SEBI) allowing debt funds to invest an additional 10% in Housing Finance Companies (HFCs), liquidity in the housing market is set to increase.

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