As the demand for residential units improved since the formation of the Narendra Modi government at the Centre, consultancy firms like CB Richard Ellis and Knight Frank predict that prices are also likely to firm up in the coming days.
The trend is likely to further strengthen as banks have started cutting the interest rates on home loans.
Therefore, consultants advise end users to take advantage of the present slowdown, which has pushed builders to offer freebies to clear their inventories.
In the coming festival seasons, it is expected that special schemes launched by developers will give good opportunities to buyers.
A Knight Frank report on residential real estate said that the election results which led to the formation of a stable government at the Centre, coupled with the incentives announced for the housing sector in the Union Budget, have improved homebuyer sentiments in the last three months.
Anshuman Magazine, the chairman and managing director of CBRE South Asia Pvt Ltd, says: “Against the backdrop of a stable government at the Centre, and expectations of faster decision-making and positive reforms, activity in the housing market across leading cities is likely to see improvement in the forthcoming quarters.
“Development firms are expected to focus mainly on the completion of projects under construction. Additionally, current and planned infrastructure projects are likely to propel India's residential investment market forward.“
Mudassir Zaidi, the national director (Residential Agency) of Knight Frank India, says, “Despite showing signs of weakening, the NCR market has been able to hold residential prices in the last couples of quarters.“
However, with distinct revival in the realty market, prices are likely to see an appreciation of around 2% in the next six months--to around Rs 4,500 per sq ft.
The Knight Frank report says that supply-side stakeholders are quite bullish about the residential sector and expect better launches and sales volumes by the end of the year. Sales inquiries have gone up in the past months, indicating some sort of revival.
According to the report, new launches will increase by 10%, to 37,000 units in the second half of 2014, compared to the same period last year in the NCR.
The report also says that the weighted average residential asking prices in the NCR have increased by 5%, from Rs 4,195 per sq ft in the first half of 2013 to Rs 4,400 per sq ft in the first half of 2014. Developers are persistent and continue to launch projects at higher prices, claiming increased input costs and higher borrowing costs. However, they have taken cues from the weakened consumer sentiment and have been offering EMI-sharing schemes and freebies.
Going forward, the report said other important real estate markets will also see sharp appreciations.
Mumbai is expected to lead in terms of price appreciation during the second half of 2014, at 10%, on the back of a strong revival in sales, the report said.
On the residential price front, while the weighted average price in the MMR increased by 4.2% in the first half of 2014, the forecasted increase for the entire year (2014) is 10.1%. Quality housing developments and corollary social infrastructure prices in the Navi Mumbai micromarket have climbed fast. During the first half of 2014, price growth in Kharghar and Panvel, the most active markets, was 6% and 4%, respectively .
Price levels in another most active residential market, Bangalore, continue to move upwards, the report said. The weighted average residential price in Bangalore increased by 11%, from Rs 4,020 per sq ft in the first half of 2013 to Rs 4,473 per sq ft in the first half of 2014.
This can be attributed to the rising cost of input materials and the relative decline in new launches. The report forecasts the prices to increase nominally , by 5%, in the second half of 2014 to Rs 4,540 per sq ft, compared to the first half of 2014, on the back of a moderate recovery in sales volume.
The weighted average price in the Chennai market is likely to increase by 3% for the full year of 2014 against the 5% increase seen in the first half of 2014.
However, the residential markets in Hyderabad could see the price discount that it has diminish in the coming years, compared to other frontline IT-ITeS-driven cities like Bangalore, Pune, and Chennai, the report said.
Similarly , Pune also registered a sharp slowdown in the sector, which has started reviving in the last couple of months, the report said.
The revival in the sector is further deepening because of the revival in the economic outlook which is also indicated by the rise in the demand for office space in all the six cities--NCR, Mumbai, Bangalore, Chennai, Hyderabad, and Pune.
The combined absorption of these cities has increased from 14.7 million sq ft in the second half of 2012 to 17.9 million sq ft in the first half of 2014. The Knight Frank report says that this would rise even further, to 18.7 million sq ft, during the second half of 2014.For the full year 2014, the absorption of office space is likely to touch 36.5 million sq ft-an 8% jump from the 33.9 million sq ft reported in 2013.
Shishir Baijal, the CMD of Knight Frank India, says: “A slowing economy , rising interest rates by banks, high inflation, and weak rupee, among others, contributed towards building a negative sentiment among homebuyers that resulted in dwindling sales volumes of the residential market for last some time.
“However, the (NDA) government's intention to revive the economic growth of the country seems to have struck the right chord among investors and we notice a substantial change in sentiments--for the better.“
Credit- Times of Property Online Edition, Aug, 30 2014
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