Tuesday, November 24, 2009

Residential property prices in north India inching up

Demand in the real estate sector has returned . And, with it, developers have raised prices of their products in most of the markets in north India However, prices in cities in south India have stabilised, with the exception of Bangalore, which is still witnessing a slight correction , according to a new report prepared by realty consultant Cushman Wakefield. Even after all this, prices are still lower than what they were a year ago. As the market has revived, a large number of developers have jumped in the fray with new launches.

This is expected to put some downward pressure on price points. However, with cash flow improving, developers may not go for distress selling soon.

According to the report, NCR and Mumbai have seen values climb up with the return of investors
and an end users interest in the realty market in the third quarter ending September 2009. Certain suburban markets like Noida and Gurgaon witnessed even higher growth due to heavily discounted prices in the previous quarter ending June - particularly in the new launches.

After a sharp decline in the last few quarters, capital values have started to strengthen and register marginal appreciation across most micro-markets . Cyclical demand with festive season has resulted in strengthening of prices. The launch of new projects catering to the mid-segment witnessed heightened activity resulting in price escalation. Gurgaon and Noida are the key locations to witness this activity and registered the highest growth, 19% and 16%, respectively, during the quarter.

Gurgaon witnessed the highest growth in capital values in the mid-segment over the last quarter. By September quarter, capital values of apartments in the suburban city are quoting in the range of Rs 4,000 to 6,500 per sq ft. In the periphery of Gurgaon, the prices are as low as Rs 2,400 per sq ft.

After Gurgaon, Noida witnessed the sharpest appreciation in the prices at 16%. This is essentially due to the increase in purchase activity in the new projects catering to the mid-segment , said the report. At present, the prices are in the range of Rs 3,200 to Rs 5,500 per sq ft.

However, values are still below their all-time highs by about 5-12 % in NCR, 10-20 % in Bangalore
, 6-18 % in Mumbai, 10-30 % in Pune, 6-12 % in Chennai, 7-20 % in Hyderabad, and 5-15 % in Kolkata.

Aditi Vijayakar, executive director (residential services) at Cushman & Wakefield said, “The price and the buyer’s sentiment are critical in the current market as key parameters influencing sales. Capital values in select locations in NCR, Pune and Mumbai are likely to see growth in the coming months. However, if prices increase too much too soon, there is a likelihood of them correcting again shortly; the ideal graph representing recovery should be gradual and in line with the demand that calls for a period of considerable stabilization before the hike. In the present scenario, the affordable housing segment holds the largest share of the demand pie and hence, any significant price increase in the high- and mid-segment would lead to another phase of corrections”

The appreciation of the rental values in the high-end residential locations of Delhi in the range of 8-12 % stands testimony to the increase in leasing activities in the region, the report points out. The rental value in suburban locations such as Gurgaon and Noida stabilized over the quarter despite addition of new stock due to latent demand in the region.

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