Crisil sees house market recovery in 2010

Crisil sees house market recovery in 2010
The Hindu Business Line, June 25, 2009, page 5

Our Bureau, Mumbai

Demand in the Indian residential market is expected to turn positive in 2010 due to improvement in affordability, steady economic growth and greater liquidity, says a Crisil research report on the real estate sector.

However, the decline in the currently overpriced capital values of all three real estate segments of residential, commercial and retail will persist through 2009. Commercial and retail markets will continue to see erosion of lease rentals in the next two years, it says.

The report is an analysis of over 400 areas across 88 micro-markets in Ahmedabad, Bangalore, Chandigarh, Chennai, Hyderabad, Kochi, Kolkata, Mumbai-MMR, National Capital Region and Pune.

Mr Sudhir Nair, Head, Crisil Research, 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 a strong underlying demand for housing and supply coming at attractive price points.”

The demand in the commercial and retail segments is likely to remain under stress the next two years owing to excess supply and weak offtake, he added.

The report says capital values for residential sector and lease rentals for commercial and retail properties had substantially corrected till March due to a slowdown in both the domestic and global economies, and also due to real estate becoming unaffordable.

Kochi, Chandigarh and Pune, which have greater investor presence as against end-users, saw a greater fall in capital values compared to other cities. The situation is expected to continue through 2009 and 2010, particularly in the commercial and retail segments.

However, Crisil Research believes that 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.