The Inverted Effect Of Real Estate On Different City

Some time back, developers had a reason to smile with increase in demand for real estate projects, but now with construction majors increasing prices of their projects, the buyers may not be too keen on investing at this point of time. ET Realty reports

Prabhakar Sinha

With improvement in demand, real estate prices in the country have started moving up. But, according to experts’ views and indications available from the latest data, the rise in prices may affect transactions volume, which had gone up in the recent past. According to a report by research house, Nomura Securities, first half of the financial year 2009-10 was all about improving volumes in the residential real estate properties, which had saw a severe dip during end-2008. The rise in volumes was mainly due to the developers’ adoption of a new strategy – launching affordable apartments for the middleclass segment.
However, as per the research of PropEquity, a database for the property sector in India, the report said the second half of 2009-10 seems to be about stable monthly volumes with increasing prices. But as the demand improved, builders used the opportunity to push prices up. The report said that the expectations that volumes will continue to move up following better affordability in the first quarter of 2009-10 have been belied as prices started moving up.
MUMBAI
In Mumbai, the report pointed out that prices are back to the older highs of 2007-08. This, the report says, has cut off the month-on-month volume growth trend and prevented volumes from reaching the 2007-08 peak. However, it further says that prices are unlikely to tumble from here as inventories with developers are much lower than in the past. But for volumes to pick up, prices would need to correct, which would need frequent and new launches or supply in the secondary market to increase.
NCR
Currently, National Capital Region (NCR) is doing well in terms of volumes, as price increases have been small, at 10-15%, according to the report. Nomura report says that high supply in the secondary market – as investors have started selling their holding – will keep a lid on prices going forward in NCR.
GURGAON
The appreciation in prices has affected the sale volume of residential real estate in Grugaon also. According to the report, Gurgaon was doing fairly well in terms of primary sales till October 2009, with a steady month-on-month growth in sale volumes. Since then, as prices increased by 10-15%, the sale volumes have taken a beating with monthly volumes dipping 15-20% till January 2010. But still, the report says, the current levels are healthy as average monthly levels of sale between Apr-09 and Jan-10 are a shade better than that between Jul-07 and Jun-08, when the market was affected due to global financial crisis. But the increased supply in the secondary market due to high sale volume from investors would keep a lid on further price increase, while volumes are likely to remain stable in this market.
NOIDA/GREATER NOIDA
The report says that Noida and Greater Noida markets continue to be driven upwards by the Jaypee Greens’ and other small developers’ projects. The report says that large-sized projects are being launched in Noida, which is leading to inventory levels moving up in absolute terms, though in terms of sale period, it is equivalent to the sale volume of six months. The actual inventory in the system, though, would be much higher but for the warehousing of these projects with the brokers. Nomura feels that the model of parking apartments with brokers, which is prevalent in Noida and greater Noida, is not a sustainable one and is likely to result in significantly large receivable issues for some of these developers going forward if the market takes a downturn.
BANGALORE
With IT sector picking up, Bangalore is showing signs of improvement in volumes going forward, though at a slow pace, as affordability is still good. Currently, the report says, volumes are at half the peak levels and can scale up considerably in 2010-11.
CHENNAI
Volume trend in Chennai has been flattish since early 2009. Average monthly volumes between Apr-09 and Jan-10 were lower than that between Jul-07 and Jun-08. But, the report says, decline in inventories has slowed down a bit.
HYDERABAD
Hyderabad is the worst performing city among the Top 6 urban agglomerations in India, the report says. After showing signs of a rapid recovery till Aug-09, the Telengana statehood issue and the consequent lack of clarity on Hyderabad’s status has led to a significant downturn in sales in Hyderabad.
KOLKATA
Kolkata has witnessed a stable demand since Jan-09, which is much weaker than the demand in 2007-08.
While the unsold stock with developers has come off significantly over the last two and a half years, given the weak demand, inventory in terms of months of sales is high at 18 months.
FOCAL POINT
• Currently, National Capital Region (NCR) is doing well in terms of volumes, as price increases have been small, at 10-15%, according to the report

• Gurgaon was doing fairly well in terms of primary sales till October 2009, with a steady month-on-month growth in sale volumes. Since then, as prices increased by 10-15%, the sale volumes have taken a beating with monthly volumes dipping 15-20% till January ‘10

Courtesy:- ET Realty  dt:- 02-April-2010

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