According to data provided by Gurgaon-based property research firm PropEquity Analytics Pvt. Ltd, Indian real estate rates are stabilizing. Prices that were on the rise since last year (2010) are now stabilizing in the suburbs of large metros and tier II cities.
For the last six months, builder rates of apartments have remained in the range of Rs.1,500-4,500 per sq. ft in Gurgaon, Noida, Navi Mumbai, Thane, Mangalore, Pune, Indore and other cities. And it is expected to remain so.
Says Mr. Samir Jasuja, founder and CEO, PropEquity, “Prices in smaller cities will remain stable in the coming months. I do not see any further rise in property rates in tier II cities because of factors such as rising policy rates and significant drop in absorption (sale).“ Supply is exceeding demand One of the reasons behind stabilizing of prices is the piling of inventory. Rapid urbanization in these cities is bring- ing in more and more developers in these cities, which have seen many launches in the re- cent past. For example, from the second quarter of 2010 till 30 June this year, Gurgaon and Navi Mumbai have seen the launch of 34,452 units and 31,568 units, respectively.
“Despite a high number of actual users that these cities have, demand has slowed be- cause of the huge supply. Sup- ply has outpaced demand,“ adds Jasuja. This has given you more options.
Discounts on new launches In the past year (2010), there were many new launches in tier II cities, but the trend is set to halt in the coming months.
According to a study by property consultants JLL (Jones Lang LaSalle India), high interest rates, increase in vacancy and a demand slowdown will impact the earnings of developers. A natural consequence will be slowdown in construction activity, leading to fewer new launches.
Already, the activity has diminished. The few new launches that are in the pipe- line are offering pre-launch discount of 10-15% discount over the pricing of other projects in the same area, JLL India's study states. For instance, the recently announced pre- launch rate of Delhi-based real estate firm Chintels India Ltd's project in Gurgaon was Rs.3,950 per sq. ft, when the prevailing market rates in the area are in the range of Rs.4,200-4,400 per sq. ft. Another developer, Imperia Structures, has launched residential apartments at Sec- tor 37C, Gurgaon, at Rs.3,500 per sq. ft. The company is offering an inaugural discount of Rs.250 per sq. ft.
Therefore, look out for new launches and inaugural discounts. The builder may give a bigger discount over and above this announced rate if you bargain properly.
Watch out for Delay in delivery: A slowdown in construction may also mean a delay in delivery of apartments. So, existing home- buyers may want to check out with their builders. Further, as the inventory increases, fund- ing shortage may also affect delivery time lines.
Says Mr. Ajay Puri, director, Puri Construction Pvt. Ltd, a Delhi- based developer firm, “Rising cost of labour and construction is a major challenge for most developers already battling issues such as high debt and liquidity crunch.“
Moreover, increasing construction costs are expected to hit the real estate sector, ac- cording to a recent study by PropEquity. The study estimated that the delivery of 480,000 residential units across afford- able, mid and luxury housing segments, scheduled for completion during 2011-13, will be delayed in 11 cities. The cities mentioned in the study are Gurgaon, Noida, Greater Noida (north), Mumbai, Navi Mumbai, Thane, West Pune, Bangalore, Chennai, South Hyderabad, and East Kolkata.
Correction round the corner?
Over the next 24-48 months, most of the apartments under construction at present will be delivered. But with banks and institutional lenders becoming more cautious about lending to the real estate sector, along with prices being high, this is the time when highly investor-driven investment markets witness a correction.
While new launches may have reduced rates, existing residential stock may see a small correction in property rates within the next six months. Says Ashutosh Limaye, head-research and real estate intelligence service, JLL India, “Corrections are likely but margin of correction will be small.
Src: Mint
For the last six months, builder rates of apartments have remained in the range of Rs.1,500-4,500 per sq. ft in Gurgaon, Noida, Navi Mumbai, Thane, Mangalore, Pune, Indore and other cities. And it is expected to remain so.
Says Mr. Samir Jasuja, founder and CEO, PropEquity, “Prices in smaller cities will remain stable in the coming months. I do not see any further rise in property rates in tier II cities because of factors such as rising policy rates and significant drop in absorption (sale).“ Supply is exceeding demand One of the reasons behind stabilizing of prices is the piling of inventory. Rapid urbanization in these cities is bring- ing in more and more developers in these cities, which have seen many launches in the re- cent past. For example, from the second quarter of 2010 till 30 June this year, Gurgaon and Navi Mumbai have seen the launch of 34,452 units and 31,568 units, respectively.
“Despite a high number of actual users that these cities have, demand has slowed be- cause of the huge supply. Sup- ply has outpaced demand,“ adds Jasuja. This has given you more options.
Discounts on new launches In the past year (2010), there were many new launches in tier II cities, but the trend is set to halt in the coming months.
According to a study by property consultants JLL (Jones Lang LaSalle India), high interest rates, increase in vacancy and a demand slowdown will impact the earnings of developers. A natural consequence will be slowdown in construction activity, leading to fewer new launches.
Already, the activity has diminished. The few new launches that are in the pipe- line are offering pre-launch discount of 10-15% discount over the pricing of other projects in the same area, JLL India's study states. For instance, the recently announced pre- launch rate of Delhi-based real estate firm Chintels India Ltd's project in Gurgaon was Rs.3,950 per sq. ft, when the prevailing market rates in the area are in the range of Rs.4,200-4,400 per sq. ft. Another developer, Imperia Structures, has launched residential apartments at Sec- tor 37C, Gurgaon, at Rs.3,500 per sq. ft. The company is offering an inaugural discount of Rs.250 per sq. ft.
Therefore, look out for new launches and inaugural discounts. The builder may give a bigger discount over and above this announced rate if you bargain properly.
Watch out for Delay in delivery: A slowdown in construction may also mean a delay in delivery of apartments. So, existing home- buyers may want to check out with their builders. Further, as the inventory increases, fund- ing shortage may also affect delivery time lines.
Says Mr. Ajay Puri, director, Puri Construction Pvt. Ltd, a Delhi- based developer firm, “Rising cost of labour and construction is a major challenge for most developers already battling issues such as high debt and liquidity crunch.“
Moreover, increasing construction costs are expected to hit the real estate sector, ac- cording to a recent study by PropEquity. The study estimated that the delivery of 480,000 residential units across afford- able, mid and luxury housing segments, scheduled for completion during 2011-13, will be delayed in 11 cities. The cities mentioned in the study are Gurgaon, Noida, Greater Noida (north), Mumbai, Navi Mumbai, Thane, West Pune, Bangalore, Chennai, South Hyderabad, and East Kolkata.
Correction round the corner?
Over the next 24-48 months, most of the apartments under construction at present will be delivered. But with banks and institutional lenders becoming more cautious about lending to the real estate sector, along with prices being high, this is the time when highly investor-driven investment markets witness a correction.
While new launches may have reduced rates, existing residential stock may see a small correction in property rates within the next six months. Says Ashutosh Limaye, head-research and real estate intelligence service, JLL India, “Corrections are likely but margin of correction will be small.
Src: Mint
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