Experts advise end user needs to figure out a good project with decent location and not get caught up in price fluctuations
Feb 15, 2014
Source : The Financial Express


MUMBAI: The real estate industry, which till a few months ago was plagued with issues of oversupply, low demand and weak sentiments has started buzzing with activity. 

Developers beginning to launch projects, and the Residex data released by the National Housing Bank (NHB) for the third quarter ended December 2013 indicates an uptick in home prices across the country with 16 out of the 26 cities that it covers, witnessing a rise in prices of up to 8 per cent over the previous quarter.

The interesting point to note is that even though the GDP growth has yet to improve and interest rates are not showing signs of softening and there is a major uncertainty in the form of upcoming general elections, the residential real estate market has not only bit the bullet of price hike but also project launches. However, even though there has been a pick up in activity, realty experts feel that a favourable outcome at the elections may provide the market with the desired buoyancy.

“The difference in the market six months back and now is that there is a bit of optimism now that things will improve this year. However till election outcome is there with us, we are still there with a bit of uncertainty,” said Anshuman Magazine, chairman and MD, South Asia, CB Richard Ellis.


If 22 out of the 26 cities witnessed a fall in residential real estate prices in the quarter ended June 2013, the prices went down in 10 cities of the 26 in the quarter ended September signalling some stability coming back to the sector.
However, by the quarter ended December 2013 only 8 cities witnessed a fall in prices whereas 16 cities including major markets such as Delhi, Pune, Bangalore and Chennai witnessing a rise. Mumbai, however, saw the prices remain flat.

Delhi, Bangalore and Pune witnessed a rise in prices for the first time since the quarter ended March 2013. While Nagpur saw the biggest rise of 8 per cent, Guwahati and Pune saw the prices rise by 7.4 and 7.3 per cent respectively.

Home prices in Delhi rose 3.2 per cent over Q2, while those in Chennai and Bangalore rose 3.8 per cent and 3.7 per cent respectively.


There was a perception in the market till two quarters ago that a price correction was imminent due to flagging demand and job losses, which kept several buyers in the wait-and-watch mode. The situation has changed now. Industry experts feel that the price rise is a result of factors such as rising input costs, pick-up in demand and expected rise in economic activity including creation of new jobs.

“Price is a function of the cost of land and construction cost. Since these two costs have gone up substantially, it has led to a rise in the prices,” said Om Ahuja, CEO, residential services at Jones Lang LaSalle India.

RV Verma, chairman, NHB agrees that the price rise is due to higher input costs, but more significantly due to an upswing in demand from the end-user segment. “There is a strong demand coming in from the end users. While interest rates are not coming down and have in fact gone up, home buyers are not willing to stay on the sidelines now and are coming into the market for their requirements thereby leading to a demand-induced price rise too,” said Verma. NHB also acts as a quasi-regulator for the sector.

But price rise in not being witnessed across all categories such as the premium segment where prices are still high. “There is some activity in the mid-segment as there is an underlying demand there,” said Magazine who expects a spike in sales and prices after a favourable election result and after the new government announces its reform steps.


A rise in demand and a subsequent rise in prices has led to a surge in the number of projects being launched across various markets. An industry insider, however, added that most of these projects were stuck in the queue for environmental clearance and have now got the green signal. “Recently a number of such projects received the environment clearance thereby laying the ground for the launches,” said the source who did not wish to be named.

“There is an expectation that the overall economic activity will rise after the elections and so developers feel that if they launch their projects now then they would be able to capitalise on the demand coming up over the next six months,” said Ahuja.

While big IT companies are getting ready to increase headcount, Ahuja feels that the effect will rub-off on markets like Bangalore, Hyderabad, Pune and Chennai, the main centres for the IT and IteS sectors.

Home buyers and investors however still need to keep the basics in mind. An end-user needs to figure out a good project with decent location at a fair price and not get caught up in price fluctuations. An investor should not get in for quick exits, but enter only with a time horizon of 3-5 years, say experts.

Latest Realty News

Mumbai, Pune home prices jump 50% in past five years
Feb 15, 2014
MUMBAI: Mumbai Metropolitan Region and Pune have seen 50% jump in residential prices in the last five years, which is highest among the top seven cities, said a new survey.
Finance cost pulls down Unitech net
Feb 15, 2014
DELHI: Real estate developer Unitech has posted a 61 per cent decline in its net profit to Rs 32.8 crore for the the quarter ended December 31 because of higher expenses and finance costs.
GCDA's budget: Mixed bag with few surprises
Feb 15, 2014
KOCHI: Trust Greater Cochin Development Authority (GCDA) to spring a surprise! After mooting 'novel' revenue-generating initiatives such as the Rs 85-crore marine tunnel aquarium last year, the agency is now eyeing the education sector.
Builders get notices for 'illegalities' in sale of flats
Feb 15, 2014
THANE: The Bombay high court bench of Justices S J Vazifdar and B P Colabawala recently issued notices to the state chief secretary, leading developers, Income-Tax and municipal commissioners of Thane and Mumbai seeking a response to social activist Vikrant Karnik's letter alleging illegalities in sale of flats.
Civic body to seek Rs 92cr loan from Hudco
Feb 15, 2014
KOLHAPUR: The Kolhapur Municipal Corporation is planning to procure loan of Rs 91.44 crore from the Housing and Urban Development Corporation (Hudco) for the developmental projects under the Nagarotthan Abhiyan sponsored by the state government. The standing committee of the KMC gave approval to the proposal on Friday.
Realty markets get worse, current mood pessimistic: Realty sentiment index
Feb 15, 2014
MUMBAI: Property market across top markets including National Capital Region and Mumbai Metropolitan Region has deteriorated further compared to last six months and current sentiments are pessimistic across all zones, showed the maiden real estate sentiment index jointly developed by industry FICCI and Knight Frank India.
Indrani Dasgupta launches Balewadi F-Residences in Pune
Feb 15, 2014
PUNE: Ever thought of making a keyless entry to your home, not looking for switches to turn on the lights and air-conditioning, always welcomed by an auto deodorized and cleansed toilet, and many more of such hi-tech, fashionable amenities at your disposal?
Knight Frank sees revival in real estate market
Feb 15, 2014
MUMBAI: While developers and financial institutions believe that the present residential and office markets are weaker they were six months ago, they are optimistic that the next six months would see a change.
DLF net profit almost halves to Rs 1.45 billion
Feb 15, 2014
DELHI: DLF Ltd India's top real estate developer, reported quarterly net profit almost halved, hurt by a one-off loss, although the profit was slightly ahead of analysts' estimates.
Two teams to probe realtors’ murder
Feb 15, 2014
BANGALORE: The police on Friday formed two teams to investigate into the murder of two Bangalore-based realtors whose bodies were found with heads severed in Kollegal forest of Chamrajanagar district on Tuesday.

Latest Realty News Of State

Realty Talk's