The real estate market in India made for a heady cocktail in 2011, in the backdrop of high interest rates, relentless rise in property prices, controversies over land acquisition and various reform proposals. The entire scenario dampened real estate sales in 2011-12.
Despite this fact, a majority of developers are hopeful that property prices will rise in 2012 due to increasing demand. Similar sentiments are expressed in a recent poll conducted by ConstructionBiz360, where 100% respondents feel that property prices in India will witness an upward movement in coming months.
“The biggest hurdles for developers currently are high input cost and high debt,” points out Pradeep Jain, chairman of Parsvnath Developers Ltd, a reputed pan-India developer headquartered in New Delhi. With financial pressures mounting on, developers will have no choice but to increase prices of properties in prime locations in prime cities, added Mr Jain.
Expressing a contrasting viewpoint, real estate consultancy firm Jones Lang LaSalle India says, “Mumbai’s residential property market is predicted to witness a glut in 2012–13 owing to steady new launches at a time when sales are extremely slow.”
According to real estate brokerage firm CBRE, skyrocketing property prices slowed down demand in few cities in 2011, despite robust supply. Repeated rise in interest rates further dropped residential real estate sales and this is likely to have an impact on the residential property market in 2012.
Demand to push prices
The Ministry of Housing and Urban Poverty Alleviation estimates that there is a shortfall of 47.43 million and 26.53 million houses in rural and urban areas, respectively. This indicates the huge demand for real estate across cities in India.
Developers, therefore, expect that demand will push the prices upwards in FY13, despite inventory hold up. Some sectoral analysts argue that property market moves in phases of lows and highs. Since the last quarter of FY12 was a low, the coming quarters will be the high of the market.
With banks bringing down interest rates and demand increasing, a visible change in pricing of real estate projects will be witnessed across India.