The residential property prices may not have risen significantly in the last one year, but a comparison of
the same with two years ago shows that one’s dream house still remains unaffordable.
In fact, the property prices in some micro-markets of cities have risen to as much as 17% in the last two years. In Yamuna Expressway area of NCR for example, the prices on the last count in December 2015 were hovering between Rs 3,295 and Rs 3,557 per square feet on super built-up basis. This is about 3% rise from December 2014, but a sharp 18% increase over 2013.
Worli, the upmarket neighbourhood of Mumbai has seen more volatile price movements in the last few years.
According to data sourced from Knight Frank India Research, the prices in Worli fell by 13% in 2014,
during the first half of the year and were being quoted at Rs 31,000 to Rs 50,000 per sq.ft on super built-up level.
However, the prices increased slightly and the year closed with the prices in the band of Rs 31,000-Rs 55,000. The micro-market according to Knight Frank has seen a dip of 1% again in prices at the end of 2015.
Mudassir Zaidi, head (residential services), Knight Frank India says that the volatility in prices is linked to customer sentiment and of course a function of demand and supply. Zaidi says that there is no uniformity in buying patterns of premium real estate, there would be periods when a handful of units are sold by the developers, followed by a period of fewer sales, and it is in these times that the prices may have come down reflecting in a drop in growth rates.
Also, in the last two years, Worli has seen some new projects come in the market, which has added to the supply.
“The temporary corrections seen might also be a result of competitive pricing, and some schemes that builders might have offered during those periods to garner sales,” Zaidi says.
Indeed, in the last two years, around four-five premium projects entered Worli market from developers like Omkar Realtors, Oberoi Realty, Rahejas, Four Seasons and HBSs Realtors, which are said to have stirred the market.
Gaurav Gupta, director, Omkar Realtors says that at starting stages of the project there are bound to be discounts, but as the projects progress, he has not seen a price decline, and denies that the prices in Worli would be lower compared to 2014. “We launched our 1973 project in Worli at Rs 34,000-Rs 35,000 per sq.ft rate in 2013 end, and a year and a half back the rates had gone up to Rs 43,000 per sq.ft. Now that we are 10 months away from possession, the rates are in the range of Rs 46,000-Rs 50,000 per sq.ft,” he says.
Meanwhile, high levels of inventory seem to be impacting the prices in NCR the most. Barring Yamuna Expressway area, the prices have either declined or not changed in most micro-markets in the last two years. This perhaps in some sense could explain the increase in sales witnessed in NCR. According to Mumbai-based research firm, Liases Foras, the sales in NCR have surged 33% in the three months of January-March 2016 on a year-on-year basis to 18.1 million square feet.
Among the three cities, Bengaluru is the only exception where prices have not seen any signs of abatement. In fact, in all micro-markets, the prices have moved only north. The prices in Sarjapur Road at Rs 4,500-Rs 7,200 per sq.ft for instance, are up a sharp 10% compared to 2014 and a good 15% since 2013. Similarly, in Yeshwanthpur prices range between Rs 6,500 and Rs 10,750 per sq.ft, which is an increase of 8% over 2014 and a sharp 17% jump over 2013.
This would come as a surprise as in the last one year, property consultants have raised red flags on the rising inventory levels in Bengaluru as well. In the fourth quarter ended March, Bengaluru had 36 months of inventory remaining to be sold, data from Liases Foras shows. However, as the market is more of an end-user driven market, experts say the prices are more real and appreciate with surge in demand, unlike NCR or Mumbai, where an influx of investors can push the prices up and their flight can bring prices down.
Also, compared to Mumbai or NCR, inventory levels are much lower in Bengaluru. While Mumbai Metropolitan Region continues to have 51 months of inventory, NCR has 60 months of inventory to be sold.
“The pressure on sales velocity is more prominent in the premium and high-end segment in Bengaluru compared to middle and low segment, which is doing better than the former in terms of sales velocity,” says a market analyst.
Indeed, Bengaluru-based Sobha Developers has tweaked its product profile to fit the budgets of a larger customer base. In the three months to June, Sobha’s profits plummeted to a 10-quarter low, mainly because the company could not sell apartments, priced over Rs 1 crore. In Bengaluru, its home ground, a Rs 1 crore ticket size falls within the ambit of luxury apartments whereas Sobha was catering to the price range between Rs 1 and Rs 3 crore. In April last year, the company launched “Sobha Dream Series,” an offering which built apartments between 650 sq. ft and 1200 sq. ft, priced between Rs 50- 70 lakh.