RESIDENTIAL real estate will lead the recovery of India’s wounded property market in 2010 thanks to accelerating economic growth, lower interest rates and improved liquidity, Indian ratings and research agency CRISIL said Wednesday.
Prices for commercial and retail space will likely remain weak through 2010 because of oversupply and slack demand, CRISIL said in a new study of 10 cities across India.
‘Residential real estate is where we think by 2010 we can look for some kind of recovery,’ head of research Sudhir Nair said in a conference call with reporters. ‘There is a significant overhang of supply in commercial projects. … You can’t see a lease rental increase for a couple of years in this market.’
India’s property market, like many around the globe, boomed from 2005 to mid-2008. Average prices of both commercial and residential space more than doubled during that period, according to CRISIL.
In some high-demand places, like Mumbai, the nation’s financial capital, commercial prices went up 231 per cent, while residential prices rose 121 per cent.
Since July, prices have softened. CRISIL predicts commercial lease and rental rates will fall by 38 per cent from early 2008 peaks. Residential prices have already fallen by an average of about 20 per cent, and will likely correct another 10 per cent, CRISIL said.
But falling prices have done little to redress fundamental mismatches of supply and demand in the residential market, Nair said.
From 2009 to 2011, an additional 110 million square meters of residential real estate has been planned – far more than predicted demand of 47 million square meters – but most of that has been targeted at high-end luxury properties, where demand has withered.
What India needs is affordable housing close to jobs. Developers who snapped up pricey land in urban centers during the boom, however, can’t afford to build cheap housing there and instead are sitting on the land, Nair said.
Source: Straits Times, 24 June 2009
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