2011, a year to cherish

Anjana Chandramouly | Updated on December 31, 2011

It was marked by good sales, a lot of demand in the residential sector and the maximum number of project launches in recent years.

The year 2011 was a year to cherish for developers in Bangalore with good sales and a lot of demand in the residential sector. It was when the Bangalore property market saw the maximum number of project launches in recent years. The demand and the resultant sales of apartments in Bangalore gain significance if one were to recall that 2011 was also when banks increased their home loan rates by approximately 250 basis points.

The upward movement in rates wasn't really very successful in keeping the buyers away from the market, thanks to salary hikes also becoming normal in the IT/ITeS sectors, which drive the property market in this city. But the year did see its share of woes with regard to rising construction costs, and, consequently, margins taking a hit for the developers. Property prices in most markets, except those like Bangalore, did see an upward pattern, and subsequent sluggish demand.


Mr Sushil Mantri, Chairman and Managing Director, Mantri Developers, and President – CREDAI – Karnataka, says, “The year 2011 started with a lot of promise for the realty sector, which witnessed the launch of many promising projects. But the latter part of the year also saw a slowdown in the market, due to frequent increases in the cost of cement, steel, iron, sand etc.” Construction cost went up by almost 30 per cent, contributed by a 50 per cent increase in labour costs, and 20 per cent increase in material costs — cement prices went up by 30 per cent, steel prices were up 10 per cent, and some other materials were up 20-30 per cent, say developers.

Mr Mantri adds that the rate hike by RBI to curb inflation has also deterred the growth of the sector to an extent. Though banks did pass on the additional burden of the rate hike to customers initially, the last three hikes didn't witness any rate transmission to customers. In fact, banks now want to keep their lending rates attractive enough to keep their home loan portfolio growing. Commercial banks and housing finance institutions also held housing loan exhibitions in 2011 to reach out to customers in a better way.

Despite the fluctuation in the market, Mr Irfan Razack, Chairman and Managing Director, Prestige Group, recalls 2011 as a particularly good and vibrant year for the realty industry in south India, especially Bangalore. “The year has seen a good response in the residential segment, in both the luxury and the mid-segment. The commercial and retail segments have also witnessed steady and robust leasing through the year. We expect this to continue into 2012 with a healthy Q1 (calendar year),” he says in a press release.

How will the prices hold this year? Mr Razack says that from a home investment perspective, realty prices will only increase with time or face stagnation at the most, as rising input costs further make it difficult for any price correction to happen in the near future. “However, on a better note, we can expect a possible decrease in interest rates in 2012,” he adds.

The company, which had four residential project launches in 2011, has several launches planned for 2012, including Prestige Bella Vista (Chennai), and Prestige Mayberry, Prestige Summer Fields and Prestige Silver Crest (Bangalore). “We will also inaugurate Forum Vijaya Plaza in Chennai and Oakwood Prestige Premier Serviced Apartments in the Forum Value Plaza during this period,” he says. According to a press release, the company will also expand its presence in various cities across south India, such as Chennai, Hyderabad, Kochi, Mangalore, Mysore and Goa.


2011 has seen a significant rise in the demand for luxury residences in Bangalore, says Mr Neville Vaswani, Managing Director, Vaswani Group. “Bangalore has also emerged as one of the preferred destinations for realty, thanks to the comparative cost advantage which Bangalore enjoys in comparison to cities like Mumbai and Delhi. Though it was a challenging year for all the real estate players, it hasn't affected new projects coming up,” he adds.

Mr Vaswani hopes that 2012 will be a better year for the real estate industry, “with far less fluctuation in the market and a lot of correctional measures taken by the government to stabilise the economy”. A stable economy will give a major boost to the confidence of investors and buyers in the real estate market again, he adds.

Real estate developers now hope that this will spill into the new year too!

But for many, what 2012 holds for the real estate sector remains a big question. “In terms of the residential segment, the deadlock between the buyers and developers should break in favour of buyers,” says Mr Pranab Datta, Vice-Chairman and Managing Director, Knight Frank India. As this happens, he explains that the pent-up demand from the section of buyers, who are sitting on the fence in anticipation of price correction, would translate into improved fortunes for the residential property market. “Employment scenario, inflation and interest rate have a bearing on the overall sentiment of buyers. Since houses are bought by people who are confident, these factors will have a role to play, and hence cues from government action will be keenly watched,” he adds.

“In terms of the commercial office market, the performance of the service industry has a significant bearing, says Mr Datta. According to him, the slowdown in the global economy, which impacts the Indian Business Process Outsourcing sector, and the muted expansion plan of domestic players, will exert pressure on the commercial office property market. “The commercial office market will continue to remain subdued on account of weak global and domestic economic indicators. As policy deadlock breaks and reforms gather steam, leasing activity will improve. However, rentals will remain under check on account of a strong supply pipeline in major commercial centres,” he adds.

Published on December 31, 2011

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