Realty defies ground reality

Updated on Nov 05, 2007 12:10 AM IST

Despite lukewarm response from purchasers and wait-and-watch attitude by the middle class, real estate prices refuse to climb down, reports Lalatendu Mishra.

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Hindustan Times | ByLalatendu Mishra

Real Estate prices have refused to show any marked decline in most parts of the country despite lukewarm investors’ interest and a wait-and-watch policy adopted by middle-income groups to buy property.

According to a research report by Emkay Share & Stock Brokers, realty prices would remain stable or at best fall by 5 to 7 per cent, as demand remains robust. Realty in some pockets of Mumbai, especially in the luxury segment, has even seen a 5 to 7 per cent price hike, according to the Builders Association of India.

However, with investors beginning to offload housing stocks due to a decline in the return on investment, realty prices in several areas in the Delhi National Capital Region have begun dipping by as much as 10 to 15 per cent.

“There is hardly any decline in prices. There is a slowdown only in residential buying activities. Commercial space is selling like hot cakes. Several new projects are coming up and developers are holding on to their prices,” said an analyst with a leading consulting firm. In the Mumbai region, though the middle-income group has started exploring the possibility of buying property in far-flung areas, commercial office space had witnessed high demand and prices have risen.

At several places, especially in the business districts, commercial real estate rentals have gone up by more than 50 per cent, said analysts. “Delhi is more an investor-driven market, while Mumbai is more demand driven. Apartments and commercial space in Delhi are blocked by investors and prices are bound to get impacted there rather than in Mumbai where demand is still very high. That is why the market is volatile in Delhi,” said the analyst from the consulting firm.

Emkay said in its report that increasing urbanisation, growing per capita incomes and affordability is driving demand for residential real estate.

“Growth in the IT/ITES segments is leading to increased demand for commercial properties. Increase in the penetration of organised retailing is leading to demand for retail malls,” the report said. A sharp correction in the commercial and retail property segment is unlikely, as demand would continue to remain robust, the report added.

“As per estimates made by NCEAR, the number of households with annual income exceeding Rs 10 million will triple to 141,000 by 2009-10, from 52,000 in 2005-6.

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