While real estate prices in the volatile Mumbai and the New Delhi are experiencing a sharp decline, Bangalore’s property prices, however, remain unfazed.
Being an end-user market, property prices in the past have not corrected beyond 10-15%, even during the major economic crisis in 2009.
“Mumbai and Delhi are investors’ markets. There is a lot of speculation, hence investors tend to offload their stock in the market,” said KS Girish, local director, Jones Lang LaSalle India.
This, in turn, leads to a sudden burst of unsold inventory, as a result of which developers have to offer their products at more attractive prices to rejuvenate sales, as is being witnessed of late.
A similar speculation in Bangalore would have different results.
“Buyers tend to defer their decision to purchase until such a time that the interest rate moderates. But as most consumers in Bangalore invest in property for their own use, sales volumes decline, however, inventory remains stable,” said Girish. Hence, fresh supply into the market has dropped of late, with fewer new launches being made, he added. With sluggishness in sales continuing through the festive season in Mumbai and Delhi, the absorption of housing has dropped considerably to 6 million sqft and 10 million sqft, respectively, according to an SBI Cap Securities report. These are also the two regions with accumulated maximum unsold inventory, of 132 million sqft in Delhi and 99 million sqft in Mumbai. This, coupled with unfavourable economic conditions, has put pressure on the prices in these regions, which are set to witness a sizable fall.
Bangalore, on the other hand, has been experiencing a steady absorption in the sector, of about 6 mil million sqft every month.
However, the number of new launches is down to million sqft a month from 7 million sqft, has helped balance the inventory levels in the city, and thus further stabilise prices.
“Bangalore-based developers outperformed their peers, with a strong uptick in launch and sales numbers. We expect this out-performance to continue,” said Sandipan Pal of Motilal Oswal Financial Services Ltd. “Due to the generous hikes in the IT sector, the confidence levels to invest are high, which is translating into robust sales of apartments here,” added an industry expert.
Experts predict a stable environment for the next 9-12 months, with a natural appreciation in prices from 5% to 10%. Due to the huge stock availability and inherent nature of pricing mechanism, barring cost escalations, residential prices are likely to remain stable. The large availability of projects at affordable cost would ensure steady off-take, according to a Motilal Oswal Financial Services report.
Comments