News APP

NewsApp (Free)

Read news as it happens
Download NewsApp

Available on  gplay  » Business » 'Housing prices will not fall'

'Housing prices will not fall'

September 30, 2009 12:12 IST
Get Rediff News in your Inbox:
After getting a good response from buyers for mid-income homes which were 25-30 per cent cheaper than the market price, realty developers have started increasing home prices by 15-30 per cent in some cities to cash in on the opportunity.

Some are even launching new office projects or promoting these aggressively, despite concerns of an oversupply in markets such as Mumbai. Raghavendra Kamath caught up with international property consultant Knight Frank India's chairman Pranay Vakil to get his views on the current market dynamics. Excerpts:

How are the home prices moving?

Prices of ready products have moved up by 10-15 per cent but not in the projects which have just been announced. Developers can afford to wait where they have sold 80 per cent of a project.

Greed is coming back. So, developers can increase prices. I am sure that prices will not go down from here onwards. More than price-rise, what we are seeing is the withdrawal of freebies, such as absorption of interest rates, free stamp duty and registration charges, free parking and so on.

Though prices have moved up in certain markets such as south Mumbai, on an all-India level -- which includes markets such as Bangalore, NCR, Hyderabad and so on -- there has been no major price increase.

How is the demand for homes now?

A major section is pent-up demand, wherein buyers have been waiting for the last one year or so but did not purchase for various reasons. Now they feel prices will not go down further.

Then there is the seasonal demand, which comes up during the festive period which is considered good for the property market. Between October last year and now, a lot of things have happened, such as cuts in home loan rates, cash reserve ratio, repo rates and so on.

Hence, the mood has turned positive. As far as investors are concerned, they number very less, not as many as two years ago. The days when an investor used to buy five flats in one go are gone.

How is the state of the office market, which is seeing an oversupply in areas such as Mumbai?

The office market is seeing better volumes compared with previous quarters. People are taking advantage of lower rentals. If their contract is coming up for renewal and if they have higher rentals, they are moving to office complexes which have lower rentals.

Wherever projects are nearing completion, developers are using maximum marketing strength to get those spaces occupied, as they do not want to sit on vacant spaces. Just as in the residential market there is demand for ready spaces and not for those under construction.

In the office market, supply will continue to exceed demand in the next two years, which will have a downward impact on rentals.

Do you think developers will shift their focus towards premium housing now, as we have seen a slew of new launches of such projects in the last two weeks?

Not in the near future, because affordable housing is still the major segment which is driving volumes now and developers need it. However, there is a good demand for premium housing if it is in a good location which has short supply of such projects.

Why are we not seeing any private equity deals in big numbers, though there are enough investible funds and valuations have rationalised?

You will see funds investing between now and March as the financial year comes to an end. How much can they wait? They also need to tell their investors why they could not invest in the current market conditions.

But PEs (private equities) are very choosy about developers and projects because of the horror stories they have heard. They want to ensure they will not encounter problems.

Get Rediff News in your Inbox:

Moneywiz Live!