DELHI: Colliers International, the leading real estate services company, has released its India Residential Overview and Forecast Report.
Due to the pessimistic economic outlook, sales volumes have come down by 15 per cent to 40 per cent in cities like Gurgaon, Mumbai and Delhi. In the primary market, developers in 2013 did not reduce the base selling price, but many were willing to negotiate and offered various incentives. New launches were also down in Mumbai and Delhi by 38 per cent and 28 per cent respectively.
Bangalore bucked the trend and more units were launched in the city in 2013 as compared to 2012. However, the new launches have dried up in the 4th quarter. In the secondary market, a substantial discount was available and prices were well below that of the primary market.
Investors shied away from the market, as they found it difficult to flip units and do not foresee significant capital appreciation in the realty sector in the short term.
Projects that were close to completion witnessed robust demand from end users (especially in Gurgaon and Noida).
According to Colliers International latest residential report, demand for residential units in both the primary and secondary markets remained subdued. Pressures of increasing unsold inventory and a liquidity crunch resulted in fewer project launches. There was an increase in the incentives being offered to sell property, such as easy payment plans, discounts and free gifts with bookings. Mumbai, Delhi, Gurgaon and Noida registered stable capital values throughout the fourth quarter of 2013. Select micro markets in cities like Bengaluru, Chennai and Kolkata witnessed increase in capital rates in the range of 3-9 per cent.
Residential market like Bangalore and Noida which are primarily driven by end-user, saw marginal increase in end-user and investor activity with many new projects in the pipeline offering various attractive offers and other promotional schemes to lure buyer interest. .
Pressures on rents in cities like Mumbai and NCR continued with the officials of multinational corporations and expatriates that are currently trying to optimize their costs negotiating on rental values. However, asking rentals have not changed much from previous quarter.
Various positive amendments at policy level are announced in various states like state government has increased the ready reckoner rates for residential and commercial properties by up to 20 per cent in 26 posh zones of Mumbai. The increase in rates wills impacts micro-markets like Worli, Napeansea Road, Altamount Road and Carter Road. In NOIDA and Gurgaon, in order to boost residential real estate activities, the state government has decided to allow mixed land use in commercial zones notified in the master plan.
2014 Prognosis: The overall economy growth is expected to rebound in the second half of 2013-2014 with core inflation trending down and other factors such as expected good agriculture growth, and a likely increase in export figures due to rupee’s depreciation. With economic recovery in place, real estate demand is likely to boost post general election due in the spring of 2014 as the political uncertainty will decline significantly. It is anticipated that the annual transaction volumes in 2014 will be similar to 2013, albeit the second half of the year is expected to be stronger than the first half, as market activity after the general elections is expected to be better than now until then. Development completions will continue to be below average as developers shall refrain from adding more supply until the overall market improves. Most of the cities are expecting the completion of various projects that were launched during 2009 to 2010 and which have already been delayed one or two year. This additional supply will keep capital and rental values stable across all micro markets
Says Amit Oberoi, national director, Valuation & Advisory Services and Research “The Indian real estate markets are primarily sentiment driven, and the perception due to the adverse economic climate is that the residential sector will witness lower demand until at least the national elections. We believe that for those looking at a longer-term investment, this is a good time to buy a property. Property today is available at good discounts, and with prospects of a stable government the demand is likely to rebound. In the secondary market, a substantial discount was available and prices were well below that of the primary market. This is primarily because investors shied away from the market, as they found it difficult to flip units and do not foresee significant capital appreciation in the realty sector in the short term. On the other hand, projects which were close to completion witnessed robust demand from end users (especially in Gurgaon and Noida).”