Residential real estate: Half-way through 2009, residential real estate rates began to buck the effects of the slowdown and moved up. In Mumbai, developers raised rates by 12-15 per cent assuming that the renewed demand was sustainable, but this backfired when demand slowed again. Delhi showed a more rational graph, thanks largely to a better volumes profile, with price escalations of 5-10 per cent.
This year, too, residential demand will continue to lead the revival, bolstered by a lowering of mortgage rates and price rationalisation in newly launched projects. It also looks positive in terms of funding, especially in the affordable housing segment. There are two cost-to-developer components for such projects. One is the cost of land, but such projects are located in areas where prices are already low. The second is the cost of construction, which is adequately covered by the down payments taken on such units. The emphasis will be on projects that show potential for fast completion and absorption.
Office real estate: Grade A office spaces have been mostly occupied by MNC staff and the IT/ITeS industry. When the financial crunch deepened in the West, many international firms put their India entry/expansion plans on hold. We are beginning to see the first signs of revival in this area now, but the process is gradual. Investors can buy commercial real estate now since prices are near the bottom and can reap the benefits in two to three years when the office market shapes up.
Retail real estate: When the downturn hit the IT sector in 2009, there was a noticeable setback in Indian retail real estate and correction in rentals. This year, players will consolidate their operations and rationalise their business models to dovetail with the newly emerging consumer dynamics. Value retail will be the winning ticket and stronger players will make calculated plays in key tier II cities. High-end retail will show a stronger hand in 2010. There will also be a wider acceptance of big brands as the returning economic stability infuses buyer confidence in the market. The revenue sharing /minimum guarantee model will become the norm.
Anuj Puri is Chairman & Country Head, Jones Lang LaSalle Meghraj