Prices of homes in projects to be launched in the financial year 2012 are likely to be lower than that of ongoing projects as developers will try to lure buyers back into the market, say real estate analysts.
Analysts also observe that the price correction will be more pronounced in Mumbai, where the price rise had also been the sharpest in 2010.
Anand Narayanan, national head (residential agency) of Knight Frank India, told FE, ?The probability of new supply coming at lower prices is higher than prices of existing supply coming down. This is because no developer would like to sell the remaining stock in an existing project at a cheaper price.? Agrees an analyst from IDFC Securities, ?The weakness in prices is seen across India. However, in Mumbai, the prices moved much faster than other regions, and now the sales have dried up. Customers are not buying, expecting some correction in prices, which may also happen?.
Declining demand in Mumbai is also visible in the property sales registrations in the last four months. April figures saw a sharp 30% year-on-year decline, touching a new 23-month low. In a March 2011 report, Sanjay Dutt, CEO-business, Jones Lang LaSalle India said Mumbai?s residential property rates in 2010 had ?surpassed the peak valuations of 2008 by 20%?. However, in March, these were back to 2008 levels. Calling it a correction, he adds, the phase will “continue for the next three months and inevitably extend into the traditionally slower monsoon and vacation period.”
However, developers do not foresee a drop in prices. ?Maybe it is true of other developers, but we are seeing appreciation in our rates. For our new 200-acre project in Thane, we are getting bookings at R6,500-R7,000,? says Niranjan Hiranandani, founder & managing director, Hiranandani Constructions. These, he adds, are ?R500 more from the ongoing rates, and, in fact, 10-15% more than last year?. Milind Korde, managing director, Godrej Properties, too, does not see a drop in prices. At the same time, developers are looking at innovative ways to make projects more affordable to buyers, by re-sizing apartments, and making changes in design that will reduce the overall cost, he said.
Nitin Idnani, senior vice-president (realty), Enam Securities, said that with the easing of the approval process several projects are likely to be launched in FY12. ?We believe these launches will happen at much lower prices in order to provide the much needed affordability and sentiment boost for volumes to return,? says Idnani in a recent Enam report.
In Lower Parel (Mumbai), prices of projects could correct from the present R28,000 per sq ft to about R25,000-R22,000 per sq ft “In Goregaon, the prices may come down to R9,000-R10,000 from the present R12,000-R13,000 per sq ft range. Thane could see a sharper correction whereby the prices could fall to R5,000 per sq ft from R7,000 per sq ft levels,? said a senior analyst from an Indian broking firm.