The real estate market is yet to recover from a slump it has been witnessing since 2013, a CARE Ratings agency report said.  
 
Nifty Realty, despite the weakness in the sector and tepid market conditions, has outperformed other sectoral indices by a broad margin. Nifty Realty, which consists of 10 companies, has moved upwards by 98% between Jan-December 2017. During the same period, Nifty-50, Nifty Bank, Nifty Auto and Nifty Infra rose by 27.8%, 40%, 29.8% and 33.2%, respectively.
 
The NIFTY 50 index during the same period gained over 27%. According to Care Ratings, the stock rally in the Nifty Realty index however is not backed by financial performance. 
 
Factors like implementation of Real Estate (Regulations and Development) Act 2016 (RERA), investment from private equity firms and foreign institutions in the Indian property market and policy support from the government through interest subsidy and schemes seem to have provided a reason to the stock markets to cheer, the report said.
 
There have been a string of legal verdicts against developers who had in the past not delivered as per their contractual obligations which infused confidence among the buyers to an extent. But final resolution in any of these legal cases is yet to be achieved, the report added.
 
The price-to-earning (P/E) ratio of Nifty Realty has almost doubled during the year compared with other sectoral indices which have risen in the
range of 10-28%.
 
“The realty sector has so far witnessed limited activity during the year 2017. Post demonetisation, the markets were quick to point out a slowdown in secondary market transaction due to cash crunch. This vacuum seemed to have hurt the primary real estate markets as well. Data from property portals indicate price correction across market. Market prices of property have corrected by up to 15% in few circles of tier-2 cities. Tier-1 markets witnessed stagnant or slight correction in prices which could be attributed to lower transaction activity,” the report stated.
 
Lower sales have led to piling up of unsold inventories over the large existing inventory. The overall construction activity in the residential segment has slowed down which is evident from the cement production. Real estate accounts for 60-65% of cement demand in India. Cumulative cement production for the period Jan-Oct 2017 fell by 5% over the same period for the previous year. 
 
There has been minor uptick on the demand during few months for office and commercial spaces but it is too early to quote a demand recovery for the overall sector. 
 
Affordable housing segment hasn’t picked up in major metro cities the way it was anticipated. Real estate sector witnessed a host of measures- regulatory as well as policies taken by the government in order to improve governance and transparency in the sector.