Realty prices set to climb

After stabilising in 2002, real estate prices are poised to rise in 2003.

Increased demand from the information technology, infotech-enabled services and the insurance sectors is expected to shore up commercial property prices. Residential property prices are climbing already.

Data from Cushman & Wakefield shows the decline in rentals and prices of residential property in New Delhi was arrested in 2002 and the market is likely to strengthen this year.

"Prices of residential property will definitely move up in the next six months," Sushil Ansal, group chairman of Ansal Properties & Industries, said.

A study by Knight Frank says there are indications of increased activity in the Mumbai residential market, especially in the sub-Rs 35 lakh segment. Hiranandani Contructions managing director Niranjan Hiranandani said, the market had moved up by 5-10 per cent on buoyant demand as interest rates on housing loans continued to fall.

Real estate developers like Ansal are also confident that the income tax exemptions for housing will not be removed, despite Vijay Kelkar's recommendations.

So far as commercial property is concerned, prices in Chennai are expected to climb the furthest. While rentals and capital values did not change in the central business district of Chennai, they moved up sharply in the suburbs and peripheral areas in 2002, Cushman & Weikfield says in its study. All the values are projected to strengthen in 2003.

In Mumbai, prices could ride increased demand from the financial services and infotech-enabled services sectors. Realty developers say that while the commercial real estate prices declined in the first nine months of 2002, the last three months saw a demand surge.

"While the increase in uptake has not yet been reflected in an increase in prices, the next six months are expected to witness a lot of action because greater volumes are likely to come in the market, particularly with the economy showing an upsurge," Hiranandani added.

In New Delhi, commercial real estate prices in areas like Gurgaon are expected to ride the surge in demand from back-office companies. The demand is projected to go up for built-to-suit campus-like office space.

In Bangalore, commercial real estate prices did not decline in 2002, Cushman & Weikfield says, though the market might weaken.