Real estate prices may rise 30-40% in 4-5 years

By Express News Service

NEW DELHI:  After remaining stagnant for the past 6-7 years, real estate prices are beginning to recover in select pockets/projects, said a report. According to a sector report by Motilal Oswal Financial Services (MOFSL), while developers will keep a close eye on how the inventory position pans out, the supply shortage will certainly cause prices to rise from that prevailing 12-18 months back.

“Prices are expected to rise 1.3-1.4x from current levels over the next 4-5 years, or 4-5% on a CAGR basis,” MOFSL said based on interaction with five companies. Domestic real estate market is showing signs of steady recovery with both residential and commercial property segments recording healthy growth in the July-September quarter. According to real estate consultancy firm Anarock, housing sales had jumped over two-fold year-on-on during the July-September period at 62,800 units across seven major cities on better demand driven by low mortgage rates and hiring in IT/ITeS sector.

One of the main reasons that led to this sharp recovery is attributed to affordability seen in property prices due to multiple factors such as discounts offered by developers, lower stamp duty and low interest rate offered by financial institutions. However, this has been observed to have reduced in the recently concluded September quarter. Few prime residential markets such as Chennai, Hyderabad and Kolkata have seen marginal price increase in recent months.

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According to Anuj Puri, chairman of Anarock Group, residential prices have already increased by 2-3 % in many markets in the past one year.  “Prices had remained largely stagnant over the past 3 years. Now, with significantly increased demand coupled with rising input costs, the price stalemate has ended. Future price increases will depend on factors and will likely be more pronounced in high-demand low-supply locations, and in projects by branded developers,” said Puri.

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