Demand-starved realty sector to get boost in 2010

Written by Sajan C Kumar | Chennai | Updated: Feb 9 2010, 05:02am hrs
The year 2010 appears to have brought cheers to the demand-starved realty sector. With signs of economic recovery emerging in the country, the real estate sector has been predicted to see increased business activities. According to global real estate consultant Cushman & Wakefield, India cities would witness a strong-end user demand for commercial real estate in 2010 with New Delhi, Mumbai and Bangalore leading the pecking order. These cities would see a combination of improving sentiments with increased expansion of businesses that eventually favour the commercial landlords. On the residential realty side, IndiaProperty.com has found via a survey that around 56% would show interest in buying a house. Also, Mumbai and Chennai have emerged as the favoured property investment destinations with Bangalore being the third favoured destination.

The Cushman & Wakefield Economic Pulse said most of the cities would enter a bottoming phase in terms of rents this year. The year 2010 is also shaping up to be a strong year for real estate investment. With demand from real estate end users returning, we think investors in core real estate assets will start to aggressively explore opportunities to deploy their funds. This demand will be underpinned by the supportive monetary policy that most Asia-Pacific economies will adopt in most of 2010, the report says.

IndiaProperty.com, the site that offers comprehensive property resources, conducts online surveys every quarter to get first-hand feel of the attitudes and preferences of property seekers value in the real estate sector.

Of the 1,500 individuals surveyed, 56% respondents consider making a property investment in the next 6 months. Of those surveyed, 46% prefer 2BHK, 23% 3BHK while 20% prefer to buy an independent house. Also, 10% of people are ready to invest in property worth Rs 75 lakh. As many as 33% of people assume property rates will remain the same for 6 months and 24% rates are likely to increase by 10% in the next 6 months.

According to Cushman & Wakefield, it was feared that massive unemployment would reverse the urbanisation trend of major developing cities in Asia as lack of jobs forces migrant workers to return to their rural hometowns. Even under such adverse conditions, studies have shown that there is no conclusive evidence of such a drastic structural reversal.

The latest residential market review by Knight Frank, 367,000 units (equating roughly to 533 m-sq ft residential space) are expected to come up across seven major cities by 2011-end. Approximately 75% of the supply would be accounted for by 2 and 3 BHK units, indicating a shift by developers to smaller units.

Although the residential market is on an upswing again, the trauma of 2009 has shifted markets focus squarely on affordable housing and long-term development of this initiative is expected to necessitate greater cognizance of consumer sentiments by developers. This has already resulted in introspection by developers, who, due to greater price sensitivity in the realty market, are now being forced to justify exorbitant floor rise charges and loading, the review said.