Chennai:
If you have been putting off investment in housing hoping that prices of residential units in the city would go down, think again. Chennai’s residential price index has surged by over 300 per cent within the last five years and there are no signs of its tapering, if you were to go by the numbers put out by the National Housing Bank Residex, which has been tracking the price movement since 2007.
This comes in the wake of India Ratings and Research, a Fitch group company, upgrading its outlook on the real estate sector across India to negative to stable for 2013 - up from negative.
According to NHB Residex’s latest data for the July-September 2012 quarter, residential housing prices in Chennai grew by 311.95 per cent as compared to 2007. In contrast, Bangalore and Hyderabad witnessed a jump of 98.33 per cent and 84.30 per cent respectively over the same period.
Addressing a press conference here on Wednesday, India ratings’ senior director Sreenivasa Prasanna said that free cash flow of real estate companies turned positive during the last one year, which in fact may improve builders’ ability to hold on to the price of the property. He attributed the positive cash flow to efforts by builders to improve their liquidity by adopting a bouquet of strategies, including monetisation of non-core assets as well as land holdings, selling plotted developments, exercising prudence in launching new projects and adopting joint venture route to develop projects.
Chennai registered the highest jump among the 20 cities that were taken into account for the study, followed by Faridabad (217.26 per cent), Bhopal (206.13 per cent) and Pune (201.07 per cent). Prasanna also said that the demand for residential real estate across India stabilized in 2012 with year on year growth in home loans from banks showing an uptrend from May 2012, though the sales of large players in the residential market declined marginally last year. The decline was attributed to the economic weakness coupled with the associated apprehension of employee downsizing and salary freezes, which adversely affected consumer sentiments.
Going forward, India ratings believe that commercial demand in real estate would be hit due to subdued job growth in the information technology sector where average quarterly net headcount addition in 2012 has been around 28 to 32 per cent - lower than the previous two years. The rating agency also predicted that the demand for retail price is likely to remain muted in the near term.
It also predicted that developers would continue focusing on affordable housing (with average ticket size of Rs 2.5 million to Rs 3.5 million) and shift to Tier II and Tier III cities
If you have been putting off investment in housing hoping that prices of residential units in the city would go down, think again. Chennai’s residential price index has surged by over 300 per cent within the last five years and there are no signs of its tapering, if you were to go by the numbers put out by the National Housing Bank Residex, which has been tracking the price movement since 2007.
This comes in the wake of India Ratings and Research, a Fitch group company, upgrading its outlook on the real estate sector across India to negative to stable for 2013 - up from negative.
According to NHB Residex’s latest data for the July-September 2012 quarter, residential housing prices in Chennai grew by 311.95 per cent as compared to 2007. In contrast, Bangalore and Hyderabad witnessed a jump of 98.33 per cent and 84.30 per cent respectively over the same period.
Addressing a press conference here on Wednesday, India ratings’ senior director Sreenivasa Prasanna said that free cash flow of real estate companies turned positive during the last one year, which in fact may improve builders’ ability to hold on to the price of the property. He attributed the positive cash flow to efforts by builders to improve their liquidity by adopting a bouquet of strategies, including monetisation of non-core assets as well as land holdings, selling plotted developments, exercising prudence in launching new projects and adopting joint venture route to develop projects.
Chennai registered the highest jump among the 20 cities that were taken into account for the study, followed by Faridabad (217.26 per cent), Bhopal (206.13 per cent) and Pune (201.07 per cent). Prasanna also said that the demand for residential real estate across India stabilized in 2012 with year on year growth in home loans from banks showing an uptrend from May 2012, though the sales of large players in the residential market declined marginally last year. The decline was attributed to the economic weakness coupled with the associated apprehension of employee downsizing and salary freezes, which adversely affected consumer sentiments.
Going forward, India ratings believe that commercial demand in real estate would be hit due to subdued job growth in the information technology sector where average quarterly net headcount addition in 2012 has been around 28 to 32 per cent - lower than the previous two years. The rating agency also predicted that the demand for retail price is likely to remain muted in the near term.
It also predicted that developers would continue focusing on affordable housing (with average ticket size of Rs 2.5 million to Rs 3.5 million) and shift to Tier II and Tier III cities
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