Property prices in Bangalore are expected to see a rise of 10-12 per cent in 2011 on the back of rise in input prices along with hardening of interest rates.
However, demand will remain robust with sound volume growth for most of the real estate developers in the current calender year despite a possible rise in home loan rates.
"Demand will remain robust and there will be sound volume growth in Bangalore as the interest rate hike will not substantially increase home loan rates," Sushil Mantri, president of Confederation of Real Estate Developers' Association of India (CREDAI)-Karnataka said.
He also said that there was minimal inventory level in Bangalore market after encouraging absorption last year. Referring to South Indian market, he said there was no significant rise in property prices like Northern and Western part of the country in the last one year.
"Price rise in last one year was around five to 10 per cent across properties last year," Mantri said.
He, however, said operating margin would be under pressure this year on the back of rising commodity prices.
Recently, prices of steel, cement and other raw materials have seen a rise putting pressure on the profitability of the real estate developers.
Further, hardening of interest rate is expected to impact the cost of funds for the real estate developers.
"Fund flow is sound to the industry as a whole and there is no shortage of credit either from commercial banks or from non-banking financial institutions," Mantri said.
Demand up tick has also been witnessed in the commercial and retail segment in the last one year and is expect to be sustained this year.
"Due to economic recovery, global and domestic IT companies have expanded their capacity last year, giving boost to the demand for commercial space," Sushil Mantri added.
Also, rising footfalls in retail outlets have ensured sound demand for retail space in Bangalore, he said.
He also appealed to the government to reduce taxation on real estate properties to pass on those benefit to the end users.
