A recent report by Global Property Consultants CBRE South Asia, titled India Residential Market View – 2011, indicates that the residential markets across NCR (National Capital Region) and Mumbai experienced steady price escalations during the revival period from 2009 to the first half of 2011 (with increases as high as 40-50% in certain micro-markets). However, the latter half of the year saw stagnation in overall prices.
Numerous repo-rate revisions by the Reserve Bank of India (RBI), leading to upward revisions of mortgage rates, stricter controls on teaser rates earlier offered by financial institutions to lessen EMI burdens in the initial loan years, and inflationary pressures impacted end-user and investor sentiments by the end of 2011. This, coupled with a supply pile-up, led to downward pressures on capital values across various micro-markets in these leading hubs. The year 2012 began on a positive note as the central bank reduced repo rates by 50 basis points for the first time in months (after increasing them 13 times in the last two years), but the impact on demand rejuvenation may be limited.
"During 2011, we witnessed initial buoyancy in the real estate market as investor and developer sentiment improved, riding on the high residential demand wave. However, with repeated interest rate hikes, rising prices, and prevailing economic conditions, the market saw a dip in sales towards the middle of the year," said Anshuman Magazine, Chairman & Managing Director, CBRE South Asia Pvt Ltd. This resulted in a supply surplus in the key markets of NCR, Mumbai, and Bangalore, causing capital values to remain flat across various micro-markets in these three leading hubs.
"While the recent rate cut by the RBI has helped generate positive sentiments in the market, stagnancy in demand will continue in the short to medium term unless there is an overall improvement in the economic scenario," Mr. Magazine added. The NCR market witnessed considerable appreciation in capital values in the first half of the year, with premium markets experiencing steady demand from expatriates, high net worth individuals (HNIs), and executives from multinationals and Indian companies.