Are you planning to purchase a house? Then, metropolitan cities might still prove to be a better bet as prices in small Tier I cities have inched up faster compared to the metros,
Residential property pricing is seeing a correction from the peak levels in 2007-2008, a little before the recession set in. According to a survey report, nine of the top 15 metros in the country have reported a decline of up to 15% in housing prices for the period January-March 2010, as compared to July-December 2009. These metros are Delhi, Kolkata, Hyderabad, Kochi, Patna, Ahmedabad, Lucknow, Bhopal and Surat. And prices in Bangalore and Mumbai have not moved significantly in 2009 - during July-December, prices here rose between 1.72% and 1.61% respectively, compared to January-June 2009. Bangalore, Mumbai, Faridabad, Chennai, Jaipur and Pune have seen the housing prices jump by up to 14% in January-March 2010, as compared to July-December 2009.
Experts say real estate prices are not sustainable and a correction is expected. However, it will not be across the board but in select pockets. Developers are likely to offer more discounts in the luxury or highend segment. Favorable movement in the mid-income or affordable-housing segment is hardly expected and prices in these segments are likely to remain at elevated levels. Experts also point out that there is no single pricing trend that defines housing sector across the country - rather, local conditions have dominated individual markets. There is no visible national trend in the way prices have moved in the last 12 months. In some cities, prices have gone up because of vibrant local economy, whereas others are emerging as hot spots for investors.
National capital Delhi puts a high premium on any land and property available within its precincts. But surprisingly, the sheen wore off the residential pricing, with costs dipping by 20% from July-December 2008 to January-March 2010. The country's largest developer DLF said that from the peak levels, residential prices in the Delhi NCR region have almost come down by 20%. "Developers have brought down the prices so that speculators stay off the market and only genuine end users enter the housing segment," a DLF spokesperson said. Delhi Development Authority's plans for additional housing solutions next year will considerably ease the pressure on demand. As compared to Delhi, the NCR region, particularly prime areas of Gurgaon, have risen faster.
Faridabad and Jaipur have emerged as investment destinations. Faridabad, 30km from the heart of Delhi, reported 47% rise in housing prices from January-June 2008 to January-March 2010. In Faridabad, prices rose as it started on a relatively smaller base. Second, the market is far from saturated, emerging as an investment destination. Third, its proximity to Delhi gives it an edge. The city is witnessing hectic construction activity, which further lends an upward movement in pricing. After Gurgaon, people are now looking at this satellite city and due to its proximity to the national capital, prices are bound to rise.
As far as the Pink City, Jaipur, is concerned it witnessed a mixed trend; prices rose by almost 5% in January-March 2010 from July-December 2009. But, when compared to the January-June 2008 period, the prices fell by 44% in January-March 2010. Property prices in the second half of 2009 were down by 11% compared to January-June 2009. Even though the city has been seeing construction activity for a long time, the scale is relatively smaller than other metros. It is witnessing land acquisition and movement in its real estate market, not on the account of local economy or employment generation but purely for investment purposes.
Surat, Kochi and Kolkata have seen a fall in housing prices by up to 15% in the January-March 2010, compared to July-December 2009. While Kolkata and Surat have seen the sharpest fall of 15%, Kochi took a dip by 8.4%. The decline in Kolkata is quite heavy from June-December 2009 levels. Kolkata is seeing a correction in its realty market which had reached peak levels in July-December last year. In the case of Kochi, the urban-rural continuum does not fit with the economic zone. Kochi is a port city. The prime reason why demand has not really picked up there might be because of the slowdown. Volatility in imports and exports, might be the biggest contributor to the subdued demand, feel experts. Kochi has witnessed a sharp fall of almost 28% since January-June 2008, when the prices were at a peak.
The upswing in the housing prices in Bangalore, Mumbai, Chennai and Pune reflects the enhanced demand for housing by end-user groups as a result of better employment opportunities. In Bangalore and Chennai, prices rose by almost 10% and Mumbai saw a marginal increase of 6% in January-March 2010, compared to July-December 2009. Pune saw the maximum price rise of 13% in the same period. There is a regeneration of housing demand in these cities as the IT sector growth revived, leading to a positive impact on salaries. The residential market is seeing more movement as compared to the commercial one. While Chennai saw a rise of mere 10% in the supply of residential units in the second quarter of this year as compared to the previous one, Mumbai and Pune registered 64% and 144% growth respectively.
