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Residential demand to remain stagnant: 1 CBRE

The residential market in India witnessed stagnant demand for most of 2011, after an initial spurt in the first few months of the year.

A recent report by Global

Property Consultants CBRE South Asia Pvt. Ltd. titled India Residential Market View – 2011 states that while the residen- tial markets across NCR and Mumbai witnessed steady escalation in prices during the revival period from 2009 to first half of 2011 (as high as 40-50% in certain micro- markets), the latter half of the year brought in stagnation in overall prices.

Numerous repo-rate revisions by RBI which led to upward revision of mortgage rates, tighter control on teaser rates earlier being offered by finan- cial institutions to reduce EMI burden in the initial years of a loan tenure, and inflationary pressures impacted end user as well as investor sentiment by the end of 2011. This cou- pled with supply pile-up lead to downward pressures on capital values across various micro-markets in these lead- ing hubs. While the year 2012 started on a positive note with the central bank reducing repo rates by 50 basis points for the first time in several months (after increasing it 13 times in the last 2 years), the impact on demand rejuvenation might be limited.

22 GIREM 101

“During 2011, we witnessed initial buoyancy in the real estate market as investor and developer sentiment improved, riding on the high residential demand wave. However with repeated interest rate hikes, rising prices and prevailing economic conditions, the mar- ket saw a dip in sales towards the middle of the year. This led to a supply pile-up in the key markets of NCR (National Capital Region), Mumbai and Bangalore, leading to


values remaining flat across various micro-markets in these three leading hubs. While the recent rate cut by the RBI has helped generate posi- tive sentiments in the market, stagnancy in demand will con- tinue in the short to medium term unless there is an overall improvement in the economic scenario.” said Anshuman Magazine, Chairman & Manag- ing Director, CBRE South Asia Pvt. Ltd.

The NCR market witnessed considerable appreciation in capital values in the first half of the year, with premium markets witnessing steady demand from expatriates, high net worth individuals (HNIs) and executives from multina- tionals and Indian companies. Most micro-markets in Gur- gaon remained central to the residential demand curve for the NCR region, with both the primary, as well as secondary market, witnessing significant activity. However, as vacant

stock accumulated in supply laden destinations growth in capital values slowed in the last few months of 2011. The Noida market, despite being upbeat witnessing apprecia- tion on lower priced housing, also witnessed issues with land acquisition across key locations such as the Greater Noida Expressway and Noida Extension.

In Mumbai growth in capital values was largely limited to the first few months of 2011. Stagnancy in demand and supply pressures, coupled with already high prices led to slowdown in capital apprecia- tion in most of the micro-mar- kets in the city in the last three quarters of 2011. However, Navi Mumbai was an excep- tion with an appreciation of more than 20% y-o-y in capital values across premium and mid-end residential segment projects.

Residential prices across Bangalore were largely stable for most part of the year, with growth witnessed in the last quarter only. Capital values in and around the CBD appreci- ated by 13-15% y-o-y. Capital values in North Bangalore in- creased by 16-18% y-o-y due to its proximity to the interna- tional airport. Completion of a few commercial developments in South East Bangalore con- tributed to increased interest in residential developments in the area thus leading to a growth momentum in this micro-market. This led to an appreciation of almost 12-14% y-o-y in capital values in 2011.

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