Residential realty prices up by 10% =>TNN article=>opinions

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Residential realty prices up by 10%

Recovery In Demand Across The Country As Economy Bounces Back


Prabhakar Sinha | TNN



New Delhi: Residential real estate prices are going up. In the last three months, prices of affordable apartments have appreciated by around 10% across the country.
“With improvement in the sentiment in the economy, transactions in the affordable range of residential real estate have gone up. This has made developers to increase prices by 5% to 10% in the last three months,’ said Anshuman Magazine, MD of real estate consultancy firm CB Richard Ellis, South Asia.
Developers had cut prices by around 30% in first two quarters of calendar 2009 to revive the demand of residential units, which plummeted to a low level due to the global financial crisis. Magazine said the price cut led to some recovery in demand. Enthused by the partial recovery in demand, he said, the developers, who had sold a substantial portion of their projects at hugely discounted prices, decided to increase them marginally in the next phase of the projects.
According to an IIFL report, in Mumbai, prices are up 25%-40% from the bottom in early 2009, while in National capital Region (NCR), the corresponding number is 15-20%. “Constrained supply and a sudden revival in demand drove up prices in Mumbai, while revival in investor demand has led to a recovery in prices in NCR,’’ the report said.
In Mumbai, the prices of apartment in Metropolis, being developed by HDIL appreciated by 38% since March to Rs 10,500 per sq. ft. Similarly, the project, Planet Godrej, has become 20% costlier to Rs 25,000 per sq ft in the last six months. In NCR also, many developers like DLF, Unitech, Jaypee Greens, Mahagun and Amrapali among others, have increased prices of their projects in the second phase by around 10% from the launch prices in March-June. In the premium segment also, there is revival in demand, said Vibhor Gupta, senior official of Jaypee Greens.
However, prices have not witnessed any escalation in the premium segment. Similar trend has been noticed in cities like Bangalore, Pune and Chennai.
“The current trend of price escalation can not be sustained as it will affect the demand,’’ said Aditi Vijayakar, executive director of Cushman and Wakefiled. IIFL has also pointed out that affordability concerns will arise if prices appreciate to doubledigit level from the current level. Besides, Vijayakar said, as the demand has revived following the interest rate cuts by banks, many developers have announced projects in the affordable range. This will increase the supply and will put pressure on the price rise.
At the same time, another consultant said the financial condition of the developers have not improved to a level that they can hold a project for long. They need cash flow to service the debt, which they have taken to buy lands. The source said the money from other sources like dilution of equity is still not easily available. This has forced developers to depend on the sales proceeds to service debt. Therefore, the source said developers would not raise the price beyond a point.
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