Realty gets 7-year-high investment of $10 bn since 2015 despite slowdown

Real estate sector has witnessed an investment of about $10 billion since 2015, the highest in last seven years, mostly in debt form that poses a high refinancing risk if housing sales remain slow, the Economic Survey said on Friday.

“Realty prices are just holding up due to heavy inflow of capital in the sector over the last few years. It is estimated that since the beginning of 2015, about $10 billion or Rs 60,000 crore was invested in the sector by domestic and foreign investors, the highest in the last seven years,” the survey said.

Most of these investments have come via structured deals and non-convertible debentures (NCD) together estimated at around $9.5 billion. The survey said that these investments are largely in the nature of debts and FDI equity inflows in the construction development sector have been only to the extent of $81 million between April and October 2015. “High level of debt investment, while providing interim relief to the sector, poses a high refinancing risk if the housing sales continue to remain weak,” the survey said. The slowdown in sales in the housing sector has resulted in a sharp increase in the inventory of unsold housing units, especially in the northern and western regions.

“It is estimated that at the current rate of monthly sale, the unsold housing stock in the northern region would need 65 months to be absorbed.  The inventory overhang in the western and southern region is much better at 30 and 22 months,” the survey said. 

Despite weak sales and rising inventory, the housing prices in many cities and towns have increased in 2015, as per the National Housing Bank s RESIDEX (index of residential prices).