Uncertainties on the global market and the likelihood of further interest rate hikes by the RBI in the early part of 2012, sentiments on the Indian residential property market will remain cautious over the short term according to Jones Lang LaSalle India.

Low absorption rates
The absorption rate – meaning the ratio of sales over inventory in the market – is likely to be low, and the incidence of new launches will decline. Rise in capital values will be marginal because of low sales.

Affordable Indian housing will appreciate
Project-specific price increases can be expected across all sub-markets – this pertains specially to projects that are being delivered or are nearing completion. The mid-end and affordable housing segments will record healthy appreciation in capital values in the short term from a low base. We expect these trends to continue during 4Q11 and 1H12.

Investor sentiment cautious
Overall macro-economic conditions will keep investor sentiments at cautious levels, both in terms of FDI and FII. FDI inflows, which are currently muted because of the slowdown of India’s GDP growth rate, will probably remain sluggish over the short term. However, as the Indian economy continues to show its resilience in 2012, foreign investors will gain in confidence and India will become attractive among competing investment destinations.

Indian property developers face liquidity crunch
Meanwhile, Indain residential developers will continue to tackle the current liquidity crunch due to high interest rates and slow sales. We will see a slowdown in construction activity for the time being. However, as demand improves, improving sales will benefit Indian property developers who will focus on execution of their on-going project portfolios.

Thousands of non-resident Indians (NRIs) who are poised to take advantage of the Indian currency’s record falls by buying property according to The National.

The rupee is down by 16%
The rupee has depreciated by more than 16 per cent against the dollar since July, and with the currency hitting an all-time low last week, plunging to 52.50 against the greenback. Before the slide began the rupee was trading at about 44.

Substantial increase of NRI property buyers
“Developers are reporting a substantial increase of NRI property buyers across the country. Around 40 per cent of buyers are now non-resident, in comparison to the normal figure of about 10 per cent,” says PMA Razak, the president of the Mangalore Chapter of the Confederation of Real Estate Developers’ Associations of India.

Homes in India cheaper in dollar terms
The rupee’s fall has made homes in India increasingly cheaper in dollar terms, creating opportunities for those living and earning overseas, particularly in the Gulf where currencies are pegged to the dollar.

Navyroof.com the Indian property portal has seen an 50% increase in taffic year on year from NRI buyers. This comes from both NRI’s and developers looking to advertise and sell Indian property online and also NRI’s buying property in India online.

Chennai property 11% year-on-year rise
The property market offers a mixed bag in the country with some property in Chennai recording an 11 per cent year-on-year rise, whereas other areas of the southern parts of the country have seen prices slump by more than 20 per cent, according to NHB Residex, an index that tracks housing prices in 15 cities.

Big cities v’s Satellite
Big cities such as property in Delhi and property in Mumbai are still offering good returns but smaller, satellite cities such as Pune, Gurgaon and Noida have emerged as key destinations for investments, Sumansa says.

Bank of America and Merrill Lynch expects real estate prices in India to correct.

They report:

“We expect prices to correct in three key cities in the range of 10-25 per cent over next 6-9 months driven by rising inventory (over 6 quarters of inventory across towns) and macro headwinds leading to falling absorption rates,” the bank said on last Friday in a detailed research report on India’s real estate sector.

Property prices are not tumbling now but could fall later. The world growth may slow down and property prices may sag in many markets. Indian property prices continue to remain resilient.

Prices increased by 10-15%
Real estate and property developers have increased prices by 10-15 per cent across various projects since April 2011, says a note by MF Global, a securities firm. ‘Ready to move in’ projects are commanding a higher premium of 15 per cent.

Affordable housing remains a “gimmick”
Another securities firm IFCI Financial Services said that affordable housing remains a “gimmick”. To overcome sluggish demand and maintain current property rates, developers deferred launch plans for new properties. Property prices in far eastern suburbs (Kalyan and beyond) and western suburbs (Boisar and Virar) are unaffordable for the common man.

Projects are no longer affordable
The ticket value of each 2 BHK is at least Rs. 70 lakh in Mumbai for projects located within octroi limits (up to Dahisar and Thane). With the recent price hike of 15% each in Virar (western suburbs) and Kalyan (central suburbs), projects are no longer affordable by the common man.

Property prices to decline mostly in Central Mumbai
IFCI expects property prices to decline mostly in Central Mumbai by 15–20 per cent due to high inventory and bulk supply. “Owing to the trickle-down effect and strong demand, prices would correct marginally by 5–10 per cent, respectively in the western and eastern suburbs,” the brokerage said.

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1. Hotel Investment Conference South Asia (HICSA) – 2011
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2. New Age Facilities Management
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