Sunday, March 30, 2008

Real(i)ty check on prices under way

Hindu reports

Mumbai, March 29 A price correction of 10-15 per cent is slowly happening in the realty sector across the country though it is area-specific in cities.

While realtors point to various factors for the downtrend, developers blame skyrocketing land prices. Others tend to point fingers at a demand-supply mismatch and investor disenchantment. “Though a definite correlation cannot be established between the stock market and the price drop, investors/speculators are exiting the realty space,” says Mr Pankaj Renjhen, Managing Director, Jones Lang LaSalle Meghraj, Mumbai.

The impact is reflected more in the secondary markets (property resale) and in projects that have come in the last two years. The central business districts of the metros appear to be holding their own, especially in Delhi and Mumbai where economic drivers have been strong.

In Jaipur, projects are more and hence the supply side is overweight. In Gurgaon, where real time demand is for apartments in the Rs 40-75 lakh range, there is ample inventory of the premium class of Rs 1 crore plus, he says.

DLF’s entry on Old Mahabalipuram Road in Chennai with a price line of Rs 2,700 a sq ft triggered a change in the locale where the price was upwards of Rs 3,300.

Chennai suburbs are also feeling the heat, as the number of projects is on the rise. Twelve malls for a city like Indore suggests that only those with the right mix and strategy would end up survivors, given the city’s size, he says.

The apex body of developers feels land prices have touched unaffordable levels and hence the inevitable.

The president of the Mumbai Chapter of Confederation of Real Estate Developers Association of India, Mr R.S. Ajmera, said a 10 per cent correction was sure to take place in overheated markets such as Kochi, Chennai, Bangalore and Pune.

He, however, did not fail to blame the decline of realty stocks on market sentiments and the price correction to some extent on the US slowdown and sub-prime impact. The correction in real estate is also happening globally, he says.
Need-driven demand

Mr Ajmera points to the auction of a Bandra Kurla Complex plot here, for which Jet Airways bid Rs 826 crore to set up its global headquarters, to emphasise that demand is driven by need. Jet Airways was the lone bidder for the property.

Said to have the third largest land bank in Mumbai, the Ajmera Group has developed over 170 lakh sq ft in the city. It has put up mega projects in Pune, Rajkot, Ahmedabad, Surat and Bangalore.

The demand-supply mismatch is also a prime factor, Mr Ajmera said.

On the positive side, he is upbeat about the opportunities in tier II and III cities where land prices were sober and realistic.

1 comment:

George said...

Real estate has always been a good investment. Any kind of investment in property will always be a good one in the future.The real estate market believes that recent crash and concurrent volatility on Dalal Street have come as a blessing in disguise for them and property will emerge as a key low-risk avenue for the investors. This has led to investors start looking over alternate investment horizons and the real estate developers believe that property could be an attractive option, given a sharp surge seen in its prices in the past couple of years without any major period of slump. Hence Realty players see silver-lining in stock market volatility.I have discussed more in detail about it in my blog-