Personal Finance

Good demand keeps prices steady in Kolkata

Abhishek Law | Updated on August 27, 2011 Published on August 27, 2011

Despite the non-availability of value additions such as lawns or play areas, apartments with car parking spaces are high on the demand-list.

Interest rate hikes and a slowdown in global markets may have led to a cutback in property prices in metros such as Mumbai, Bangalore and Delhi; but Kolkata has bucked the trend. While residential property prices have not come down, there has been an upward shift in some areas of the city.

Interestingly, some of the developers in anticipation of an increased demand are bracing to hike prices .

Mr Santosh Rungta, Chairman of Rungta Group, maintains that volatility in markets coupled with rise in gold prices will lead to the emergence of the real estate sector as a lucrative option, leading to a rise in prices across the city.

“If people are convinced that real estate will be a good investment option, there will be a buoyancy in demand,” Mr Rungta told Business Line adding that waiting for prices to come down before investing would not be advisable.

Safe bets

Market sources admit that it would be safer to invest in projects that are ready or nearing completion. Investors should avoid plugging money into projects that are in early stages of construction; these may be plagued by delays now. Reiterating the same, Mr Anuj Puri, Chairman and Country Head, at real estate consultancy firm, Jone Lang LaSalle India, points out that lowering of crude oil prices could have a softening effect on inflation, which will in turn help home buyers. Also factoring in possible discounts during the upcoming festive seasons, there may be a discernible uptick in residential sales as against previous estimates.

“Over-leveraged developers are likely to be in for a rough ride. Many of them may be inclined to liquidating existing projects and reducing debt positions. Since liquidity is expensive on all fronts, this seems to be the only viable option for them. Many of the larger developers are already in the process of liquidating their land holdings and projects across cities,” Mr Puri said, adding that attempts at restructuring of debt will also see an increase in mergers and acquisitions between over-leveraged and more financially stable developers.

“Projects which are at reasonable levels of execution will still be able to reach completion stages and developers will be in a position to give possession to tenants, because their capital requirements are lower. However, projects in the initial stages have larger capital requirements and may face delays,” he said.

High prices

Currently, property prices in Kolkata are commanding a premium, at Rs 17,000 a sq.ft. According to industry estimates, prices in areas such as Ballygunge and Alipore vary between Rs 15,000 and Rs 18,000 a square feet.

Property in northern parts of Kolkata is available at an average price of Rs 3,500/sq. ft. Even apartments coming up in different lanes and by-lanes of the city charge anything between Rs 2,800 per sq. ft. to somewhere between Rs 4,000/sq. ft.

Despite the non-availability of value additions such as lawns or play areas, apartments with car parking spaces are high on the demand-list.

Areas such as Rajarhat — ringe areas along the Eastern parts of the city - which had seen a steady fall in prices during days of economic downturn are now commanding a price of around Rs 3,200 – Rs 3,500/ sq. ft. Market sources say prices in these areas are back to the pre-recession days when the property market in and around Kolkata was bullish.

Prices along the areas of Eastern Metropolitan Bypass vary anywhere between Rs 4,000 and Rs 8,000/sq ft.

Mr. Mayank Saxena, Managing Director, Kolkata, Jones Lang LaSalle, India said: “The high prices prevailing now are an effect of the increase in demand during the first half of the year. Interest rates, then, were low and markets were bullish then.”

While price correction has happened in over-priced markets, Kolkata has been relatively stable so far, he added.

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