The Hindu Business Line : Q2 sees residential market stabilising

Availability of new supply, shrinking demand from investors and rising interest rates have led to the ‘stabilisation’ of capital values in high-end and mid-range residential market across the National Capital Region, Bangalore, Mumbai and Pune during the second quarter of 2008. Gurgaon’s high-end segment was the sole exception, logging a substantial growth of 17 per cent in the last quarter.

The quarter also saw developers moving less aggressively on fresh project launches, and instead focusing on individual projects and increased amenities to generate buyer interest.

However, the rental market got a boost in the current economic environment, and saw increased demand for leasing of residential properties. However, despite this, rentals across most areas ‘stabilised’, barring a few projects in both high-end and mid-range sectors, since the first quarter, due to ample supply in the market, a Cushman & Wakefield report said.

According to Ms Aditi Vijayakar, Director of Residential Services at Cushman & Wakefield, “The current economic scenario and the volatile stock market situation have changed the outlook for investment options in this sector. The market now is suited for long-term investors; more for end-users than for investors looking at short-term capital gains.”

“Home buyers have been hit the hardest by the current economic situation, which couldn’t possibly have come at a worse time (than) when the sector had already witnessed a slight cooling off in demand after a price cycle,” the report said. At a time when investing in a house has begun to be treated cautiously by end-users, the interest rate hike may lead to new home buyers keeping away from the property market — at least for the time being.

On the bright side, various governmental policy decisions such as reduction in stamp duties, better infrastructure initiatives, focus on affordable housing, etc, are creating growth corridors across the country for new residential developments.

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