Residential realty prices moving up

Residential Real Estate Prices Rebound Across India

Residential real estate is experiencing a period of price growth. Over the last three months, prices of affordable apartments have appreciated by approximately 10% throughout the country. This surge comes as a positive response to improved economic sentiment.

Increased Transactions Drive Price Hikes

Anshuman Magazine, Managing Director of South Asia operations at real estate consultancy firm CB Richard Ellis, observed the shift in the market. "With improvement in the sentiment in the economy, transactions in the affordable range of residential real estate have gone up. This has made developers to increase prices by 5%-10% in the last three months”. Earlier in the year, during the first two quarters of 2009, developers had implemented substantial, up to 30%, price reductions in an attempt to stimulate demand for residential units, which had significantly declined due to the global financial crisis. Mr. Magazine noted that these price cuts did, in fact, lead to a degree of recovery in demand. This positive change, he further detailed, motivated the developers, many of whom had offloaded a large percentage of their projects at severely discounted prices, to implement marginal price increases in subsequent phases.

Regional Price Variations

An analysis from IIFL indicates varying degrees of price recovery across major metropolitan areas. In Mumbai, prices have rebounded between 25% and 40% from their lowest point in early 2009. Comparatively, in the National Capital Region (NCR), prices have climbed by 15% to 20%. "Constrained supply and a revival in demand drove up prices in Mumbai, and NCR,” the IIFL report states. Specifically in Mumbai, the price of apartments within the Metropolis project has seen a considerable 38% increase since March, rising to Rs 10,500 per square foot. In the same vein, the Planet Godrej project has borne witness to a 20% price escalation, attaining Rs 25,000 per sq ft within the last six months. The NCR region has mirrored this growth, with numerous developers, including DLF, Unitech, Jaypee Greens, Mahagun, and Amrapali, increasing prices by about 10% from the launch prices set between March and June.

Premium Segment Sees Demand Revival but Stable Prices

Vibhor Gupta, a senior official at Jaypee Greens, has reported a revitalization in demand in the premium segment, though this revitalization has not yet translated into substantial price fluctuations. Other Indian cities, such as Bangalore, Pune, and Chennai, are mirroring these market trends.

Sustainability of Price Escalation Questioned

Aditi Vijayakar, Executive Director of Cushman and Wakefield, offers a cautious perspective on the issue. “The current trend of price escalation can not be sustained as it will affect the demand,” Vijayakar argues, pointing out that renewed demand, brought on by interest rate cuts from banks, has encouraged developers to announce new projects in the affordable sector. The resulting increase in supply, Vijayakar explains, is likely to temper the upward pressure on prices.

Developer Finances and Market Dynamics

A separate consultant highlighted the precarious financial situation of many developers. This expert noted that the sector's financial health has not sufficiently recovered to allow them to hold projects for extended periods. Maintaining cash flow is crucial to service the debt that was incurred for prior land procurements. The consultant further explained that alternative funding avenues through equity dilution haven't fully recovered so developers currently remain reliant on revenue from sales to finance debt.

Comments 1

Nids•Dec 31, 2009

State is doing nothing to control the property prices. I understand price rise to some extend is acceptable but rise 5 times in 3 years is unacceptable but this is reality. When prices go up government smiles, builders laugh but common man cries. Why housing is not part of the necessities in the government’s agenda. If food can education can why cant the housing. Why government want our 50% people live in slums when it can provide good housing by properly controlling this sector. Why there is no effective regulatory body in this sector like we have IRDA or TRAI. Why petrol prices are controlled, food prices are controlled but no control on the property prices. Property owners become greedy day by day and this price rise is paralyzing the whole system. One generation bought a house in a good locality which was on the outskirts of the city sometime back. The next generation sales the same house at 10 times of rate and earns bread and butter for the rest of whole life, shifts to another outskirts of the city. Now the same man could have earned his bread and butter by doing something constructive for the country but what he did, he earned everything for the whole life by doing nothing. So this way we can say the price rise is making people lubber/lazy and this is very dangerous for the country. Another problem with price rise at this rate is causing corruption in the society because common man will indulge in it to fulfill his basic necessities. Rich remains rich and poor remains poor the truth of current Indian society. I think there has to be some law that prevents wealth transition from one generation to another this will enforce people to work more and this is the need of present day.