Demand in residential market to remain stagnant

NEW DELHI: The residential market in India witnessed stagnant demand for most of 2011, after an initial spurt in the first few months of the year. A recent report by Global Property Consultants CBRE South Asia, India Residential Market View - 2011 states that while the residential markets across NCR and Mumbai witnessed steady escalation in prices during the revival period from 2009 to first half of 2011 (as high as 40-50% in certain micro-markets), the latter half of the year brought in stagnation in overall prices. Numerous repo-rate revisions by RBI, which led to upward revision of mortgage rates, tighter control on teaser rates earlier being offered by financial institutions to reduce EMI burden in the initial years of a loan tenure, and inflationary pressures impacted end user as well as investor sentiment by the end of 2011. This coupled with supply pile-up lead to downward pressures on capital values across various micro-markets in these leading hubs. While the year 2012 started on a positive note with the central bank reducing repo rates by 50 basis points for the first time in several months (after increasing it 13 times in the last 2 years), the impact on demand rejuvenation might be limited. "During 2011, we witnessed initial buoyancy in the real estate market as investor and developer sentiment improved, riding on the high residential demand wave. However with repeated interest rate hikes, rising prices and prevailing economic conditions, the market saw a dip in sales towards the middle of the year," said Anshuman Magazine, Chairman & Managing Director, CBRE South Asia Pvt Ltd. This led to a supply pile-up in the key markets of NCR (National Capital Region), Mumbai and Bangalore, leading to capital values remaining flat across various micro-markets in these three leading hubs. "While the recent rate cut by the RBI has helped generate positive sentiments in the market, stagnancy in demand will continue in the short to medium term unless there is an overall improvement in the economic scenario," Mr Magazine added The NCR market witnessed considerable appreciation in capital values in the first half of the year, with premium markets witnessing steady demand from expatriates, high net worth individuals (HNIs) and executives from multinationals and Indian companies.

source: http://economictimes.indiatimes.com/markets/real-estate/news-/demand-in-residential-market-to-remain-stagnant/articleshow/13092800.cms