Demand in residential market to turn positive: Crisil

Demand in residential market to turn positive: Crisil
The Financial Express, June 25, 2009, Page 4

fe Bureau, Mumbai

A recent 10-city Crisil Research report on the real estate market indicates that demand in the residential market is expected to turn positive in 2010 owing to improvement in affordability, steady economic growth and greater liquidity. However a decline in the currently over-priced capital values of all the three real estate segments—residential, commercial and retail—will persist through 2009. Further the commercial and retail markets will continue to witness erosion in lease rentals through the next two years.

The report provides comprehensive information and analysis of more than 400 areas across 88 micro markets in 10 cities—Ahmedabad, Bengaluru, Chandigarh, Chennai, Hyderabad, Kochi, Kolkata, Mumbai-MMR, NCR and Pune.

Crisil Research head Sudhir Nair said, “Accelerated growth of Indian economy, recovery of global economy, improved liquidity and expected fall in interest rates are key factors that will signal demand revival in the residential segment. This segment is likely to see a much faster revival due to strong underlying demand for housing and supply coming at attractive price points.” He added demand in the commercial and retail segment is likely to remain under stress for the next two years owing to excess supply and weak off-take.

Further, the report indicates that capital values for residential sector and lease rentals for commercial and retail properties have substantially corrected till March 2009 due to a slowdown in both the domestic and global economies, and also due to real estate becoming unaffordable. Cities such as Kochi, Chandigarh and Pune, which have greater investor presence as against end-users, witnessed a greater fall in capital values compared to other cities.

The situation is expected to continue through 2009 and 2010, particularly so for the commercial and retail segments. However, the report said demand for houses will improve in 2010, backed by lower home loan interest rates as well as better job security owing to higher growth in the economy. Hence, capital values are likely to stabilise in the first half of 2010, and increase during the second half of the year.