Latest Property News on 'Property Prices'

First Quarter of 2009- Best Time to Purchase a Home

Firstly, experts feel that residential prices are likely to stabilise from April onwards with fears of deflation looming large over the Indian economy. Moreover, the persistent decrease in the general price level of goods and services is likely to bring down interest rates to affordable levels, which will mean that the pendulum will shift from a buyers’ market to a sellers’ market, from April. With real estate developers expected to further cut prices over the next three months, experts feel that this is the best time to let their indecisiveness work to your advantage.

Says Anuj Puri, chairman and country head of Jones Lang Lasalle Meghraj, “2009 will open up opportunities for investment in real estate as property prices have corrected by around 15-20% in 2008. I expect a further correction of 10% over the next three months. Price stability should arrive by March 2009 and will not climb quickly. The first three months of the new year is going to witness a surge in residential sales.” Read More »

More Help Expected for Indian Real Estate Market in 2009

The Indian government may intervene again in 2009 to help the real estate market, finance officials have said. Last week the country’s Planning Commission met to discuss ongoing financial uncertainty, with interest rates and home loan availability on the agenda. Government officials have already introduced measures designed to drive down interest on property loans and set aside $4 billion in spending for the rest of the financial year.

But more may be needed, the deputy head of the Planning Commission said, starting from April 2009. Montek Singh Ahluwalia told last week’s meeting: “The fiscal stance we adopt needs to be considered not just for this year, but also for the next year. “We are working on what the plan position should be for the next year. The decision will have to be taken by whatever government is in place after the election.” Read More »

Real Estate Sector Seeks Govt Help

Real estate prices in India are plunging, projects are failing to take off and the industry is reeling under a severe liquidity crunch, a lobby group fishing for incentives told a top policy maker on Wednesday. “Transactions are down 80 percent, prices are on downward trend everywhere, new projects are not starting, current projects may stall all over the country,” the National Real Estate Development Council (NAREDCO) said in a presentation to Planning Commission Deputy Chairman Montek Singh Ahluwalia. “Banks are not lending, (there is a) severe liquidity crunch … slowdowm is real,” the council told Ahluwalia in a meeting attended by top officials of DLF, Parsvnath Developers and Omaxe.

“Different departments of government will see what can be done,” Ahluwalia said after the meeting, without elaborating. The government has cut interest rates, launched a $4 billion spending package and cut a tax on manufactured goods to boost flagging demand in Asia’s third-largest economy. Last week, Trade Minister Kamal Nath said the government would consider a second stimulus package for industry. Indian property prices are widely seen as inflated and demand has fallen as tight liquidity made loans dearer. The Reserve Bank of India on Wednesday said anecdotal evidence indicated real estate prices had gained two to four times in the last three to four years, but had softened in some parts of the country in the wake of a slowing economy. Read More »

Oswal maintains ‘buy’ on DLF

Motilal Oswal maintained ‘buy’ call on DLF at Rs 257 per share. However, the brokerage has lowered the NAV for DLF by 24.7 per cent from Rs480/share to Rs361 / share to account for slower launch of new projects and lower real estate prices. The residential vertical accounts for 42 per cent of the GAV, commercial vertical 32 per cent of GAV, and the retail vertical for 17 per cent of the GAV. Motilal Oswal views DLF as the best managed real estate company in India with a robust business model. DLF Assets (DAL) is close to finalizing fund raising of $450 million, which could get announced by January 2009 and this would lower DLF’s receivables and improve its liquidity. DAL is likely to have 10 msf of rental portfolio by March 2009, which could yield Rs30b of cash flow through rental cash flow discounting with banks.

DLF has an agreement to sell 19msf of commercial offices to DAL by FY10-11. Till date, the company has sold 11.4msf of commercial offices to DAL (5.5msf delivery) amounting to Rs 107 billion, of which it has already received Rs 59 billion and Rs48 billion is outstanding. DLF currently has a net debt to equity ratio (DER) of 0.6x, which is likely to come down to 0.3-0.4x by FY10, aided by cash inflows from DAL, shift in strategy from lease to sale model and postponement of few capital intensive projects. DLF’s DER is among the lowest in its peer group. DLF’s low gearing puts it in a strong position to benefit from the current downturn in the RE sector. The sharp deterioration in the real estate (RE) sector since 2HFY09 is likely to result in DLF falling short of its planned launch and delivery targets for FY09. While DLF was earlier planning to launch close to 35-40msf of real estate projects across verticals in FY09, it now expects total launches in FY09 to be 14-15msf (it has launched 6-7msf till 1HFY09). The company could end up delivering 14msf (completed 6-7msf YTD) as against the delivery guidance of 22-24 msf.

Decline in Stock mkt and Real Estate Necessary- SBI Chairman

Decline in the stock market and real estate prices is a timely correction as it was unsustainable for long, State Bank of India Chairman O P Bhatt has said. “The high real estate prices and the skyrocketing sensex were not sustainable for a long period and the moderation was a timely correction, both economically and socially,” he said. The Bombay Stock Exchange benchmark index, after touching a high of 22,000 points in January, had gone down even below 8,000. At the same time, property prices which were rising at astronomical pace have started moderating following the credit crunch.

Demand for housing loan has seen a dip leading to correction in the real estate prices across the country. Speaking about the Indian economy, Bhatt said it is showing signs of moderation, however, it is growing faster than the developed economies in the world. With a GDP growth rate of six to seven per cent, Indian economy was growing much higher than that of the economically developed nations including the UK, the US, Australia and Japan, which were bogged down by the global financial meltdown, he said at a function organised by ‘Banker’s Club’ here last night.Exuding confidence, he said India was a well powered economy. “I don’t see anything that can weaken it. There is a problem temporarily, but it is not going to last forever,” he said. Bhatt said people might not buy cars as frequently as they did earlier, since perceptions have changed, but they will invest in safer places.

Mumbai’s Housing Sector Requires a Boost

Real estate players are sceptical about how much these measures would actually boost the consumer confidence, which is currently weighed down by negative sentiments. According to Jai Mavani, KPMG’s executive director and head of real estate practice, “The government’s move to increase liquidity and ease credit crunch is a step in the right direction and this should result in cooling of interest rates. However, the government needs to look beyond these monetary policies and boost the mid-market or low-income housing projects, which would perk up the housing sector. Another factor impacting demand is the consumer sentiment, which is yet to reverse. Though real estate prices have been correcting, property buyers feel that prices are still firm and expect to fall further.”

Transactions in the residential sector, especially in metros, have slowed down where prices had touched the sky few months back. Demand has been impacted even in the smaller cities because of high home loan rates. According to Sanjay Verma, Cushman & Wakefield’s south Asia & Australia MD, consumers will now have a wider choice of lenders with housing finance companies getting a refinance line from the banking industry.

Relief for Battered Realtors May Come Soon

The urban development ministry has drafted a bailout package for the real estate industry, which would be shortly sent to the finance ministry for consideration. The ministry has called for relaxation in norms for foreign loans so that realty companies can tide over the liquidity crunch, urban development secretary M Ramachandran said on Monday. The note has also urged the finance ministry to consider other sops like rescheduling of total debt of the real estate industry and reduction in home loan rates for affordable houses. “We have included some of the demands from the National Real Estate Development Council (Naredco) in the note. Once the finance ministry clears the package, it will go for Cabinet approval,” Ramachandran said.

Naredco has asked for a reduction in the interest rate on home loans by at least 3-4 %. The rate of interest on home loans has drastically gone up from around 7.75% in 2004 to around 12.75% now. Almost 90% of home buyers opt for loans to buy homes. But with the hardening of interest rates, and liquidity crunch in the market, demand for houses has been hit. The council has also asked for rescheduling of bank debt to developers with a moratorium of one-two years. The total debt of the real estate is to the tune of Rs 25,000 crore, a Naredco statement said. The industry body has also asked for an easing of norms for foreign loans and declaration of ongoing projects as NPAs. Read More »

Office Market Costs Dip Further in Mumbai and Delhi

While Mumbai’s Nariman Point dropped to 5th place ($170.85 per sq ft per annum), London’s West End ($248.66) and Moscow ($234.73) remain the world’s two most expensive office markets, respectively. Hong Kong’s CBD and Tokyo’s Inner Central District round out the top five, according to CB Richard Ellis Group Inc (CBRE) Research’s semi-annual Global MarketView/Office Occupancy Costs survey. Mumbai, which was second in November 2007, fell to fourth place in May 2008. New Delhi’’s CBD — which was placed at number eight in May 2008 — dropped to 13th place ($122.18) in the report. The report tracks world markets with the highest as well as fastest-growing occupancy costs for the 12 months ended September 30, 2008. The average rate of growth for office occupancy costs among the 172 markets monitored in the survey was 8 per cent, almost double last year’s world Inflation rate.

Anshuman Magazine, chairman & MD, CB Richard Ellis South Asia, says, “India’s office market slowdown is reflective of the global economic slowdown as a majority of the occupiers of quality office space are multinational companies. Office supply too has seen a substantial increase in the past few years. In spite of this, Mumbai and New Delhi continue to be in the top 15 world’s most expensive office markets.” “Our current perceptions are greatly affected by the current economic malaise and we tend to forget how fast rents and occupancy costs were rising over the last 12 months,” said Raymond Torto, CBRE’s global chief economist. “Clearly the rate of change is generally slowing, and in some markets the pricing direction is down. The turn in rent trajectory will provide some relief to occupiers and angst to owners. However, unlike previous downturns, which have occurred simultaneously with extensive overbuilding, the real estate market globally today is in a stronger position to weather the difficulties than in the past.” Read More »

Price Fall by 30% can Spur Real Estate Demand in India

Real estate prices in India requires to drop by 30% to spur demand, said Goldman Sachs in a report. However, the report further maintained that the sharp decline in the prices will have a negative impact on the economy. Goldman Sachs said: “Our India Real Estate Team believes that prices need to fall by up to 30% in some geographies for affordability to catch up.” The report pointed out that prices in areas like suburbs of Mumbai and Bangalore need to decline by up to 30% to boost demand. “Although prices over the past three years have gone up in line with other economies globally, they have not corrected substantially, unlike its global peers,” the report said.

It further said due to ongoing economic crisis, demand for property would also fall. “Demand for real estate is largely driven by income growth, demographics, interest rates, and inflation, but also people’s expectations of future prices. As the economy continues to slow down due to the knock-on effect of the global financial crisis, income growth will suffer, thereby reducing demand for housing,” it said. The demand for commercial real estate would also be adversely affected due to the slowdown in the IT and Business Process Outsourcing (BPO) sectors. “From the demand side, a property downturn, we think, will have negative effects on consumption and investment,” it said. Read More »

Real Estate Sector on the edge of correction

Property market in India is poised for a deep correction and the prices are estimated to fall by up to 30% from current levels, with significant knock on effects on the economy, says a Goldman Sachs report.

Supply substantially outstrips demand in commercial real estate, hints the report depicting a negative view on the real estate sector, and its supplier industries such as cement, iron, and steel, and reiterated their below consensus estimate of 5.8% GDP growth in FY10. Read More »