The demand for residential property market has dipped by 10 per cent in
the third quarter over the previous quarter due to a combination of
factors. Consecutive hikes in home loan lending rates, property prices,
affordability and uncertainty in economy have contributed to the overall
situation leading to a dip in demand.
The residential market saw absorption of 3,743 in 3Q11 against 4,301 units 2Q11, as absorption rate declined from 13 per cent to 11 per cent in 3Q11, according to Jones Lang LaSalle's real estate intelligence service report. In 3Q11, unsold stock in Bangalore totalled 31,208 units compared to 27,334 units, reflecting a vacancy rate of 51.3% in 3Q11, up from 45.9% in 2Q11. While 38% of the unsold units are in the Hosur road submarket, the Bellary road sub-market has 19% of the unsold units.
According to N S Srinivasa Reddy, residential analyst, Bangalore, Jones Lang LaSalle, Bangalore market saw the launch of 23 residential projects across submarkets in 3Q11, offering a total of 7,817 new units. Meanwhile , 13 residential projects comprising 6,171 units across different submarkets were withdrawn from active stock, as they were completely sold out.
The Hosur road submarket contributed to over 40% of the new launches in 3Q11. Among the prominent new launches during 3Q11 were Brigade Meadows at Kanakapura road by Brigade group, DLF Maiden Heights at Rajapura by DLF and Nitesh Cape Cod at Marathalli by Nitesh Estates. Prestige group launched a luxury residential project along Edward road in the prime central submarket at a launch price of Rs 21,000 per sqft besides Prestige Sunny Side and Prestige Park View along Hosur road and Whitefield respectively.
The market witnessed marginal appreciation in capital values in the range of 1-3 % during 3Q11 across various submarkets. The slow growth is attributed to a dip in sales volume owing to a sustained price increase in the past eight quarters, increasing interest rates and thereby diminishing affordability, according to Jones Lang LaSalle.
Capital values in the Whitefield submarket continued to witness healthy appreciation, which increased by 4.8% on q-o-q. Brigade Exotica was launched at Rs 4,200 per sqft while Prestige Park View was launched at Rs 3,750 per sqft. Both these projects are above the average capital values of the Whitefield submarket.
Incidentally high-end market is not that affected as villas upto Rs 3 crore continue to be in demand. The concern among developers revolves around mid-segment units in the price range of Rs 50 lakh - Rs 1 crore, says Arun Kumar, Managing Director, Tandem Property Management Services Pvt Ltd. Affordable housing units in the price range of Rs 15 lakh - Rs 30 lakh are doing well, he added.
The dip in demand is due to a combination of factors like hike in lending rate, uncertainty in job market and the current uncertainty in economic scenario , according to Natarajan, home loan consultant in the city.
Outlook:
The absorption rate had peaked when the market sentiments were healthy across different housing segments during the beginning of last year. Subsequently it dipped due to the stable demand against robust supply in the market. Capital values across different submarkets and segments are expected to either remain stable or record marginal growth. Though many developers have not revised the prices upwards, a few are joining hands with HFCs/banks to absorb pre-EMI interest till the completion of the project.
While the high and upper-mid segments in prime central and secondary submarkets in the city are expected to witness marginal appreciation, it is expected to remain stable across other submarkets of Bangalore. However, mid and affordable housing segments along Sarjapur road, Whitefield and North Bangalore are expected to record marginal appreciation in the short term due to a low base and growth of demand for residential units from IT/ITES employees in these locations, says a report by Jones Lang LaSalle.
The residential market saw absorption of 3,743 in 3Q11 against 4,301 units 2Q11, as absorption rate declined from 13 per cent to 11 per cent in 3Q11, according to Jones Lang LaSalle's real estate intelligence service report. In 3Q11, unsold stock in Bangalore totalled 31,208 units compared to 27,334 units, reflecting a vacancy rate of 51.3% in 3Q11, up from 45.9% in 2Q11. While 38% of the unsold units are in the Hosur road submarket, the Bellary road sub-market has 19% of the unsold units.
According to N S Srinivasa Reddy, residential analyst, Bangalore, Jones Lang LaSalle, Bangalore market saw the launch of 23 residential projects across submarkets in 3Q11, offering a total of 7,817 new units. Meanwhile , 13 residential projects comprising 6,171 units across different submarkets were withdrawn from active stock, as they were completely sold out.
The Hosur road submarket contributed to over 40% of the new launches in 3Q11. Among the prominent new launches during 3Q11 were Brigade Meadows at Kanakapura road by Brigade group, DLF Maiden Heights at Rajapura by DLF and Nitesh Cape Cod at Marathalli by Nitesh Estates. Prestige group launched a luxury residential project along Edward road in the prime central submarket at a launch price of Rs 21,000 per sqft besides Prestige Sunny Side and Prestige Park View along Hosur road and Whitefield respectively.
The market witnessed marginal appreciation in capital values in the range of 1-3 % during 3Q11 across various submarkets. The slow growth is attributed to a dip in sales volume owing to a sustained price increase in the past eight quarters, increasing interest rates and thereby diminishing affordability, according to Jones Lang LaSalle.
Capital values in the Whitefield submarket continued to witness healthy appreciation, which increased by 4.8% on q-o-q. Brigade Exotica was launched at Rs 4,200 per sqft while Prestige Park View was launched at Rs 3,750 per sqft. Both these projects are above the average capital values of the Whitefield submarket.
Incidentally high-end market is not that affected as villas upto Rs 3 crore continue to be in demand. The concern among developers revolves around mid-segment units in the price range of Rs 50 lakh - Rs 1 crore, says Arun Kumar, Managing Director, Tandem Property Management Services Pvt Ltd. Affordable housing units in the price range of Rs 15 lakh - Rs 30 lakh are doing well, he added.
The dip in demand is due to a combination of factors like hike in lending rate, uncertainty in job market and the current uncertainty in economic scenario , according to Natarajan, home loan consultant in the city.
Outlook:
The absorption rate had peaked when the market sentiments were healthy across different housing segments during the beginning of last year. Subsequently it dipped due to the stable demand against robust supply in the market. Capital values across different submarkets and segments are expected to either remain stable or record marginal growth. Though many developers have not revised the prices upwards, a few are joining hands with HFCs/banks to absorb pre-EMI interest till the completion of the project.
While the high and upper-mid segments in prime central and secondary submarkets in the city are expected to witness marginal appreciation, it is expected to remain stable across other submarkets of Bangalore. However, mid and affordable housing segments along Sarjapur road, Whitefield and North Bangalore are expected to record marginal appreciation in the short term due to a low base and growth of demand for residential units from IT/ITES employees in these locations, says a report by Jones Lang LaSalle.
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