This has been the year of the luxury home. Speculators returned to the real estate sector to cash in on the upper-class Indian’s luxury urges. Result: a sharp spurt in residential property prices, while commercial and retail realty prices remained muted.
But if you are planning to buy a house, the new year could still bring cheer.
Residential properties shot up around 50% in some pockets. Some rationalisation is likely in 2011 — 15% is a figure being mentioned by industry sources — especially in view of RBI’s tightening of monetary policy recently, restricting money supply in the system and putting off speculators.
“It is inevitable that we will see some levels of price rationalisation during the first half of 2011, though corrections may not be as sharp as in the recent downturn,” said Sachin Sandhir, MD and country head of consultancy firm RICS India.
Speculative investment has been almost 60% of total sales in some places, compared to the more ‘accepted’ levels of 30%. “This has fuelled unprecedented price hikes,” he said.
The supply side is expected to come under pressure, as there is inventory build-up in central Mumbai, north Mumbai, Gurgaon and Pune. “There is a backlog of about 22 months, which is dangerous by any standards,” said an industry tracker. “The desirable backlog should at best be around nine months.” Backlog refers to the rate of space bought as compared to excess supply available.
Cushman & Wakefield, a real estate consultancy firm said that price of residential apartments are likely to see minor softening in Gurgaon in 2011, “as it has already reached high price points and will see ample supply in the market.”
Prices at other locations in the national capital region would remain largely stable, it said. Analysts and brokers expect price softening across micro-markets of Central Mumbai and Northe Mumbai as well.
“The transaction velocity will go down in the residential segment in 2011 as the prices are high. But there would not be too much movement in the prices,” said Anshuman Magazine, chairman and managing director of a real estate consultancy CB Richard Ellis (South Asia).
The commercial segment of real estate is yet to recover fully from the economic slump. However, with a positive macroeconomic outlook for 2011 realtors hope to see greater activity in this segment during the later part of 2011. “We are already witnessing improvements with oversupply on a pan-India basis pegged at just 6% as compared to 11% and 25% during the earlier parts of 2010 and late 2009,” said Sandhir.