Real Estate

Sentiment in real estate sector unaffected by low sales

Bindu  D Menon Mumbai | Updated on January 24, 2018 Published on June 21, 2015

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Despite low sales volume and fewer number of projects being launched in the year, sentiment in the residential real estate sector seems to be picking up.

Industry watchers estimate a conservative price rise of 5-7 per cent, especially in the mid-segment (₹40 lakh – ₹1 crore segment) as most real estate players focus on project completion.

Collier International said that a positive trend has been witnessed in the Indian economy. Bengaluru, Chennai and Pune have witnessed a healthy kick start for prime and mid-range properties.

However, Gurgaon, Noida and Mumbai saw a decline or steady trend due to slow movement of inventory during the quarter.

“Investor money has started chasing real estate opportunities. With inflation taming down and RBI reducing policy rates, we see a further reduction in home loan rates. A continuation of this trend will fuel top-level pricing in the Indian gateway cities and will push more buyers into the value-added space in cities like Bengaluru, Pune and Chennai,” said Sumit Jain, Director (Residential Services), Collier.

Hike in prices

Collier added it expected price to remain stable in most cities in the near term, as supply is complementing demand.

According to 99acres.com, Mumbai alone grew by two per cent in the Jan-March quarter. Maharashtra focussed on creating affordable housing in the city and announced plans to develop 11 lakh houses.

With almost 60 per cent of localities recording a hike in property prices, Thane registered an overall growth of one per cent in the Jan-Mar quarter. Ashutosh Limaye, National Director (Research), JLL India, notes that developers will be under greater duress by the festive period, during which buyers/investors can expect good bargains.

However, buyers should think ahead of the curve. If interest rates were to come down further, they would be well-advised to make purchases by availing of loans at lower interest rates as in such a scenario, developers will not offer a similar quantum of discounts as they are currently doing.

He said while prices in Delhi declined by 10-20 per cent in 2013 and then stabilised in 2014, in Mumbai they increased by a negligible 0.3 per cent in 2013 and 7 per cent in 2014.

Cushman & Wakefield saw the lowest number of project launches over a period of two years in Jan–Mar quarter. With a total residential launch of 24,700 units, the decline was recorded to be over 50 per cent year-on-year (y-o-y).

Increasing project cost

Shveta Jain, ED (Residential), Cushman & Wakefield, said, “Cost of creating new projects has been on a steady increase as input costs including cost towards statutory approvals, etc, from State Governments, cost of land, and land development have been rising. In addition whilst the market sentiments are positive and the enquiries have increased, conversion of interest to sale is low.”

A Motilal Oswal report on real estate says that the time correction has been underway for the past two years and may continue for another couple of years.

With economic revival expected to improve buyer affordability, residential sales should resume its upward trend.

Published on June 21, 2015
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