The latest analysis from property consultants Jones Lang LaSalle shows that since the height of the real estate market in 2008 prices have fallen by 25 to 30% in areas such as Delhi and Mumbai. But now they have shot up again and reached similar levels.
According to JLL India Chairman Anuj Puri there is not much slack in the market and rising prices in 2011 could affect demand. ‘Affordable housing will continue to do very well in the coming year,’ he said. He added that demand for mid-segment residential units in Mumbai is far greater than available so some prices increases in this sector are expected in 2011.
However, the high end of the market is the most likely to see prices fall. Sales of luxury residential properties in Mumbai, for example, are falling and in November reached their lowest number of transactions since June 2009.
‘The residential transactions have been falling continuously, but I don’t think prices would drop drastically. It would fall by a mere 10 to 15% at the most, but more importantly, prices would stabilise now and capital value hikes wouldn’t be so rampant anymore,’ said Ambar Maheshwari, director of real estate advisory services firm DTZ.
Others also believe that 2011 is set to be a challenging one if prices rise and this may force developers to drop there prices. There are signs in Mumbai, for example, of buyers’ resistance to higher prices and this along with rising interest rates, tightening of credit to developers and excess supply could affect the markets.
A fall in the number of transactions that started in October is now likely to be now followed by a cut of around 15% in Mumbai residential prices next year, according to Kaustuv Roy, executive director of realty services firm Cushman & Wakefield.
‘The last two months have seen interest in Mumbai and Gurgaon realty markets easing sharply. Next year one can expect 10 to 15 % fall in realty rates. Most of this correction is likely to take place between April and September,’ he explained.
According to Pranay Vakil, chairman, Knight Frank India, banks are not going to be sympathetic about loans to developers. ‘Ultimately, developers will have to offload their inventory at lower prices,’ he said. He expects real estate prices to ease around 15% in the next three months.
Cushman & Wakefield also notes in its latest report that despite the buoyant demand and strengthening economic sentiments, prices are expected to fall in many parts of Mumbai, especially Central, North and Far-North Mumbai owing to large upcoming supply. It expects rental values also to be under downward pressure owing to upcoming supply in most markets. But Roy said that Southern India is likely to remain a stable market as the prices are still affordable and have not moved significantly higher. ‘Demand is genuine and less speculative, while supply remains at decent level,’ he said
