Correction due in residential property at select locations and projects, says Anuj Puri
Moneylife Digital Team 20 October 2010

Jones Lang LaSalle India chief believes that prices are beyond peak levels and developers will not be able to sustain

There is considerable apprehension in the real estate market over the price levels in several micro-markets that have gone beyond the peak of the boom in 2007. Now, the chorus of voices expecting a correction in residential properties is growing louder.

"While I expect selective price escalation to happen until the end of 2010, we are very likely to see corrections related to location, projects and the degree of unrealistic pricing happen after that," said Anuj Puri, chairman and country head, Jones Lang LaSalle (JLL) India. He was speaking on the sidelines of a meeting of the company's country heads from Australia, Japan, China and South-East Asia in Mumbai yesterday.

Mr Puri said prices were at their peak and builders could not afford to hike prices any further, notwithstanding the rapid rise in cement and steel prices. "If they (builders) increase prices further, it would affect demand," he said.

It has been reported that some developers are offering fabulous incentives-like Mercedes Benz and Skoda Fabia cars-to brokers to boost sales. Asked about this recent trend, Mr Puri said, "Only developers whose projects are overpriced and who cannot hold inventory anymore, are making such offers. As there are very few or no buyers for such overpriced properties, the developers are trying to corner some sales from the improved sentiment in the festive season."

While India is struggling to see some improvement in sales in the residential sector, Singapore remains the focus of foreign investment in the residential sector with better facilities for medical treatment and education, as well as well-provided spaces for corporate offices. Interestingly, the investment by Indians in residential property in Singapore is the third highest after Indonesians and Chinese.

"Indians are positioned in third place with a 10% to 11% contribution in the residential segment investment in Singapore," said Christopher Fossick, country head, JLL, Singapore. Indonesians top the list with 35% to 45% by value, and the Chinese have 15% to 16%.

On the other hand, China's realty sector is clouded by regulatory concerns, which analysts fear could lead to a fall in the property market. The Chinese government recently introduced a regulation whereby each household is permitted to purchase only one home in Tier I cities such as Beijing and Shanghai. This has led to worries that home purchase contracts already entered could be cancelled. KK Fung, managing director, JLL, Greater China, said, "It (the regulation) will lead to suppression of demand in the short term, but in the long term the demand and supply will get leveraged."

Commenting on the commercial real estate market, Alastair Hughes, chief executive, JLL, Asia Pacific, said, "Singapore is the most-preferred destination for multinational companies-mainly financial institutions, followed by Hong Kong and Mumbai. The commercial market in Tokyo (in high demand till the recent recession) is sluggish as the country is recovering slowly from the global recession."

In terms of rental values, Jones Long Lassalle has forecast that rental value in Mumbai would increase by 7% by end 2011. The highest increase in rental value is expected in Hong Kong at 33% and the lowest in Kuala Lumpur at 1%.  JLL is a financial and professional services firm specialising in real estate services and investment management. It operates from 750 locations in 60 countries.

1 decade ago
Prices are going to move upwards & not south in any case .Builder lobby claiming a growth of 20 ~40 % upwards from current price.
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