The real-estate market is not focusing on end-user sales, but higher valuations and raising funds through the capital market, says an independent real estate researcher

Real-estate sales fell by 50%-60% in the quarter ended June, as the market turned speculative and developers held prices in the hope that they would improve. Real-estate brokers also expect prices to rise over the next six months.

“The situation in the real-estate market is speculative. Despite falling sales and an inventory pile-up, prices are continuously rising,” said Pankaj Kapoor, founder and managing director, Liases Foras, a real-estate rating and research company.

“It looks like the focus is not on the consumer, but on valuations and IPOs (initial public offerings). People are looking for signs of stability in the stock market. It’s nothing but hoping and that is what is holding the prices in the property market.” Mr Kapoor suggested that the market would not undergo a correction until the hopes of the industry were fulfilled.

In a recent survey of real-estate brokers conducted by ICICI Securities, 93% of the respondents said that prices had moved up during the past three months, and 75% said they had found an increase in inquiries in the affordable segment. According to the survey, Mumbai and the National Capital Region (NCR) had seen the maximum rise in inquiries.

In the NCR, multinational real estate and property service firm Knight Frank said that an increase in consumer confidence, together with availability of various affordable housing units was the key factor driving demand for housing. During the second quarter, the NCR residential market saw the introduction of a new ‘flexi-payment’ plan for buyers and the revival of ‘EMI on possession’ scheme. The flexi-payment plan is designed along the lines of the construction-linked plan and aims to ease the liquidity pressure on buyers, an improvement over previous schemes. Knight Frank, a commercial and residential property estate agency, believes that the two schemes along with reasonably priced home loan rates, could spur the demand for housing in the NCR.

Mr Kapoor maintained that developers alone could not be held responsible for lower sales. “I feel that investors and merchant bankers are not giving them (developers) a green signal, in that investors are not too keen to buy real-estate stocks. In the last two or three IPOs, the participation of retail consumers was a low 7%-8%. The majority were institutional investors. This is an indication that there are not many buyers for realty stocks at current prices and valuations.”

During the June quarter, the Moneylife Real Estate index inched up 1% to 3,790.33 points, while the Bombay Stock Exchange (BSE) Realty index declined by 2% to 3,196.8 points. During this period, the BSE Sensex rose marginally from 17,527.8 points to 17,701 points.