Property demand: Chennai, Gurgaon hot, Mumbai cold

Mumbai: The real estate market is sluggish in Mumbai, but, looking at the absorption rate, residential property is selling like hotcakes in other cities like Bangalore, Chennai and Gurgaon.

The absorption rate is the number of apartments sold in a month from the available inventory in a market. It is an indicator of the demand situation in a particular real estate market. For example during the calendar year 2011, Mumbai (including Navi Mumbai and Thane) saw 6,650 apartments sold each month against 9,092 in 2010, according to global bank JP Morgan. This means, the absorption rate fell 27 per cent.

Every property market has an inventory of apartments. If the absorption rate is high, the inventory gets exhausted quickly. With the absorption rate in Mumbai falling, it will take two years to sell the unsold inventory.

Property trends in five major cities are explained below:

Mumbai: JP Morgan expects prices to correct in Mumbai only when some new residential projects are launched. Currently, high prices are keeping buyers away. Over the past one year, residential prices in Mumbai have remained flat. In pockets like central Mumbai and North Mumbai, they have increased by 10 per cent. New project launches fell 50 per cent during the calendar year 2011.

Gurgaon: The residential absorption rate in Gurgaon rose 11 per cent in 2011. This is largely due to a high launch activity in the market. Property prices in the market rose 17 per cent during the year. Unsold inventory in the market remains at healthy nine months of average absorption. This means the demand for homes in Gurgaon is much higher than Mumbai.

Bangalore: The residential absorption rate in Bangalore grew 19 per cent in 2011. This was primarily driven by large affordable launches done by reputed developers. Price appreciation now seems to be catching up in Bangalore with completed/nearing completion projects witnessing 10-15 per cent appreciation over the last few months. New launches in Bangalore rose 56 per cent in 2011. Average property prices rose up to 24 per cent across key real estate pockets during the same period.

Chennai: The residential absorption rate in Chennai rose 37 per cent in 2011. High launch activity has resulted in increased unsold inventory in the market. Unsold inventory rose to15 from 10 months early last year. Average property prices rose 8 per cent to 30 per cent in pockets from Anna Nagar to Rajeev Gandhi Salai.

Noida: The residential absorption rate in Noida fell 31 per cent in 2011. In Greater Noida, it fell even further at 56 per cent. This indicates a sharp slump in demand due to a weak buyer sentiment given the recent political change that could impact project approvals/new launches. In Greater Noida, construction progress of launched projects has also slowed down in the market due to contraction of funds by banks/NBFCs. Average property prices in Noida rose 6 per cent.

Source :- http://profit.ndtv.com/news/corporates/article-property-demand-chennai-gurgaon-hot-mumbai-cold-301232

Gurgaon residential property investor update

Over the last one year, capital values rose by more than 30-35% in Gurgaon's residential sector. Developers are now going slow on execution of real estate projects, resulting in a drop in supply of residential apartments in most prime markets. Emerging residential areas are still not able to meet the huge housing demand.

Two key reasons for increasing rental and capital values for residential properties are:

 Because of rampant construction delays, the expected supply of residential properties announced in early 2009 has not been able to reach the market. Around 500,000 units that were scheduled for possession in key markets by end of 2011 are delayed by another year

- There has been an increase in lateral hiring by corporates. With job scenario improving all over the country, people have more to spend. This has resulted in good investment opportunities, and investor sentiments in the affordable and mid-income segment of Gurgaon's residential market have improved.


Hot Locations

Residential property prices on the upcoming southern peripheral road connecting to National Highway 8 have seen considerable appreciation over the past few months. This location holds great investment potential thanks to enhanced connectivity that NH8 provides to Manesar and Dwarka. In particular, residential properties along the Dwarka Expressway have attracted interest from the mid-income buyer group. As prices soar in upcoming locations of Gurgaon such as Golf Course Extension, Sectors 70 and Sector 78, buyers have been looking at these alternate locations.


The Downside

That said, not all residential projects rank equally from an ROI perspective. Whatever appreciation in capital values Gurgaon residential properties have seen does not seem as significant when seen in the light of factors like the higher interest rates on home loans. Nominal capital appreciation of a property may be as high as 25-30%, but the actual ROI after making adjustments for inflation and higher interest rates can be nil. There is a 75% chance of investing in a property that will not give investor any gains - and in some cases it may even result in a loss.

Gurgaon is expected to see a residential property supply explosion. There are 55,000 ready flats on the market today. We expect to have around 6000 ready flats by end of 2012, with an additional 65,000 by the end of 2014. Another 20,000 in 2015 will take the final tally to almost 150,000 by the end of 2015.

Out of the total supply, properties which offer locational advantages in terms of vicinity to airport and Metros connectivity will have better absorption. Strategic location and superior amenities will be the keys to profitable residential property investment in Gurgaon in the foreseeable future.

Long-term fundamentals

Gurgaon remains promising for office space, and there are good prospects for more major global players setting up operations here in near future. On the whole, this augurs well for the residential property market, more or less assuring relatively healthy absorption of residential space in the times to come.  The new infrastructure initiatives being undertaken by the Government will also play a crucial role for Gurgaon's residential and commercial property sectors.

Source :- http://www.moneycontrol.com/news/real-estate/gurgaon-residential-property-investor-update_682406.html