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| Residential property in south stabilises in Q3 |
| BS Reporter / Chennai Nov 12, 2009, 00:46 IST |
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Capital values of high-end and mid-end segment properties in Chennai and Hyderabad stabilised in the third quarter (July - September) of 2009 according to international property consultants Cushman & Wakefield. Bangalore, on the other hand, continued to witness corrections in prices across micro markets in the city.
The firm had said that there were a few exceptions like high-end properties in Boat Club and Poes Garden that dropped 4-6 per cent as well as mid-end projects in Velachery (-4 per cent) in Chennai.
In Hyderabad, high end properties in Himayatnagar, Begumpet and Somajiguda (-1 per cent) as well as mid-end properties in Kukatpally (-4 per cent) witnessed marginal corrections. However, values are below their all time highs by 10-20 per cent in Bangalore, 10-30 per cent in Chennai and 7-20 per cent and in Hyderabad.
With conservative launches and slightly improved sales in Bangalore, prices largely continued to correct, although the rate of correction dropped to a large extent. Chennai and Hyderabad also saw cautious project launches coupled with a gradual shift towards ensuring delivery and promotion of previously launched projects to maintain its stable price trend.
Aditi Vijayakar, executive director of residential services at Cushman & Wakefield, said the price and the buyer’s sentiment are critical in the present market as key parameters influencing sales. Project launches across cities have been slower and with capital values in locations like Mumbai and NCR having dropped, we have noticed an upswing in certain markets driven by their sale prices.
There are exceptions like Bangalore that have continued to witness a correction as the investor community hasn’t revived their activity yet. The growth witnessed by cities like Bangalore has been largely ITôITeS dependent. Given the volatility in the market, the relatively short-lived drop and subject to the extent of supply that finally gets added to the market, we may witness flattening of the residential markets by the third quarter of 2010.
He added, the price and the buyer’s sentiment are critical in the present market as key parameters influencing sales. In the present scenario, the affordable housing segment holds the largest share of the demand pie and hence, any significant price increase in the high and mid-segment would lead to another phase of corrections.”
End-user interest was better placed over investor interest in Bangalore in the third quarter. This rise in end-user confidence, together with improving economic conditions, favourable borrowing conditions and rationalised capital values cumulatively led to a revival of sales volumes in the housing sector.
The city saw two major project launches in Q3 of 2009, of 1,900 units (two and three bedroom units) in the peripheral zone. Downward correction of capital values continued, though at a slower rate, across most micro markets of the city, reaching stabile points in the east in the mid end segment.
Encouraged by gradually reviving sales volumes, many developers either reduced their discount percentage or refrained from providing more discounts. Investors continued to refrain from making purchases in anticipation of further drops in values and also because of prevailing low rental yields from residential properties in many micro markets. High end segment capital values are expected to see stability in the short tem, barring central and southern locations of Lavelle Road, Off Palace Road, Off Cunningham Road, Koramangala, Outer Ring Road etc that are likely to further correct.
Mid-end segment capital values of most micro markets, are expected to drop further; except for off central and northern areas, which are expected to stabilise in the short term. Rental values of the high-end housing segment saw corrections in the range of 17-24 per cent, except for the east micro-market (-8 per cent). High end segment rentals were affected because of reduced expatriate demand and shrinking corporate leasing enquiries.
Values for mid end properties remained relatively stable due to the strong demand and favourable variables for end users such as reduced interest rates, positive economic confidence etc. that led to renewed interest. Due to the disparity in launches and delayed supply for mid segment housing, the rental and capital values in majority of locations are expected to remain stable with stronger demand for lease of quality projects offering greater lifestyle amenities.
Rental and capital values witnessed minimal correction in Hyderabad as price points inched closer to buyer expectations. The last 3-4 months saw developers getting conservative in launching new projects especially in the luxury segment. Projects totalling to approximately 650 units were announced during the third quarter.
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