Real estate: Pricing trends 2014

The ten most expensive and preferred cities in India to buy or rent property are (alphabetically listed) Bengaluru, Chennai, Ghaziabad, Gurgaon, Hyderabad, Kolkata, Mumbai, New Delhi,  Noida and Pune.

The mood is upbeat

With the change in government at the Centre, interest has revived in the real estate sector, which has been languishing in a trough these past few years. While experts find the current sentiment bullish, they also state that only positive policy changes will attract the buyer to invest in the real estate market.

Across the country, prices have stabilised since June this year. Also, supply has increased and property developers are making renewed efforts to complete projects and offer attractive terms to draw buyers. Business Today's cover story in their September 2014 issue tells of developers  dealing with the issue of supply overhang by reducing prices and cutting back on new launches. This will surely help in price correction.  But, although, supply still exceeds demand at present, increasing demand is a very positive indicator of the health of the real estate sector in the country.

City indices across the country have been stable, except in Delhi where there was a drop in values in the last six months. Mumbai stabilised and rose by 4% and Chennai by 3%, while Hyderabad dipped by 2%. All other cities recorded negligible change.

Liquidity flow has eased

Prime Minister Modi has announced his vision of Affordable Housing for All by 2020. Budget 2014 has classified properties between Rs 25 and Rs 50 lakhs as being in the affordable range. In addition, increase in the upper limit of affordable housing loans to individuals from Rs 25 lakh to Rs 50 lakh in metros, and from Rs 15 lakh loans to Rs 40 lakh in other centres, will make housing more affordable to a larger market-segment and impact long-term sales.

Foreign Domestic Investment (FDI) and private equity (PE) investment have added to the liquidity flow.  Further, according to the real estate web platform, Magicbricks.com¹, "The recently cleared final guidelines for setting up and regulating Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) will also boost the market. Sovereign and Pension Funds have been opened into real estate and are expected to provide a new source of funding to help developers."

A new trend across Indian cities

Apartments continue to be the most preferred property type in the country, followed by housing plots. Bangalore, Pune and Kolkata are reported to offer the maximum options in properties in the Rs 30-50 lakh range.

The trend this year has been an increased demand for housing units costing Rs. 5 crores and above. Speaking of Chennai, Sudhir Pai, Business Head at Magicbricks.com, has stated that in the quarter ending September 2014, demand for premium luxury properties (Rs 5.0 to 10.0 crores) increased by 11%, a figure that is higher than in Bengaluru at 8%  and Hyderabad at 9%. This bucks the notion that Chennai is not the most preferred city to invest in real estate in southern India. The reason for this could be that high-ticket property buyers  see the benefits of  investing in the current market before prices escalate.

In Chennai

Unlike other major cities in India, property-buying in Chennai has always been for the end-user with hardly any speculative buying.

While investment in commercial spaces has shown a healthy increase of 16% in Chennai too, properties worth Rs 40 to 60 lakh are the most preferred budget range across the city. Demand for 1 BHK units grew by 2 % from the 8 % in the previous quarter. Over 60 % demand was recorded for 2 BHK units. The 3 BHK continued to be the second most preferred BHK category with demand at 27 % and supply at 30 %. Demand for larger units (4 BHK and above) dropped from 4 % to 2 % in the Jul-Sep 2014 quarter.¹

So ...

All told, now is a great time to take the price advantage and invest in real estate. To sum up, the overall market outlook is more active now than in the past five years or so. Aditya Verma of makaan.com advises, "As sentiment improves and transactions begin to pick up pace, we will see developers withdraw these discounts and schemes. So, between now and the middle of next year may be the best time to buy property."²

Sources:

1. Magic Bricks 

2. Business Today