Rentals in Metro

Rentals and capital value of office space witnessed a further drop during the January-March quarter in metros like Delhi, Mumbai, Bangalore, Chennai, Hyderabad, Pune and Kolkata.

The financial and IT sectors, which have been hit hard by the slump, are postponing their capital expenses and giving up on excess space.

The adverse supply-demand crunch, high interest rates and low mismatch and non-availability of confidence in the economic outlook financing options, has impacted the realty sector hard in the form of substantial slowdown in construction in the last few months of 2008. Most new projects remain on paper. While not ruling out the scope of further correction in the coming quarters, the report said that the prospects of any sharp decline are unlikely. Transactions are expected to pick up in the major cities in the medium to long-term period.

With the IT sector facing a slump, the peripheral market of Gurgaon continues to be slow. This quarter witnessed an increase in the supply (around 0.25 million sq ft) of furnished space and availability of sub-lease options In Noida the current vacancy rate is around 25% to 30%.

Mumbai has also seen a southward trend in rentals across all micro markets. The central business district of Nariman Point has witnessed a significant correction in rentals over the last 6-9 months with additional secondary stock added to the micro market, taking the vacancy rate to around 15%.

Despite the general lack of demand, extended business district - Lower Parel and Worli has witnessed a revival of construction activity in many of the projects that were earlier stalled.

Real Estate Market

Mumbai Buyers tread cautiously even as developers offer discounts

On a steady descent, the property prices across the city have dropped by 30-40 per cent from its peak rates. Realty research figures indicate that the average property prices in Mumbai, Thane and Navi Mumbai (Mumbai Metropolitan Region) have come down from its peak of Rs 8,136 a sq ft in June 2008 to Rs 4,607 a sq ft in March 2009. With 420 ready and 1,349 under-construction projects in the MMR, the mounting inventory has led to a more pronounced price cut in the latter category.

Eager to tide over the absolute slack, several developers are advertising limited time discounts. HDIL has done the same at its Kurla and Andheri projects, Nirmal Lifestyle at its Mulund project, Lodha at its Dombivli project as well as a slew of others with big-sized projects in Thane and Navi Mumbai. They urge buyers to go in for a panic buying till the offer lasts, claiming that there will only be an upward movement in prices hereafter. This is a far cry from the initial days of the slump, when developers dangled sweeteners like stamp duty waivers or a free car and electronic goods, ruling out any reduction in rates.

However, realty players say that with banks tightening the noose around developers, the fate of many under-construction projects is unsure. Real estate rating agency Liases Foras estimates that about 50 per cent of the ongoing projects are doomed to either get stalled or get deferred.

Property rates are bound to fall up to 60 per cent. Not only are the developers starved for money, the buyers also have no money to spare. Also no buyer wants to put his money or risk taking a loan for buying an under-construction flat.

lats in prime areas such as Peddar Road have come down from a staggering Rs 1 lakh a sq ft to a range of Rs 60,000-35,000 a sq ft. In Bandra, it has dropped from Rs 25,000 a sq ft to Rs 14,000 a sq ft.

Manpower crunch in Real Estate sector

Real Estate sector is a sector which was hurt the most during recent recession and is now taking off.

During the real estate boom before the downturn, many developers hired more manpower than required. But during these 2 quarters of recession, the extra manpower was laid off. These employees are mostly taken in other sectors, as reality sector was damaged the highest. Now when the developers are in need of extra staff, they won't find proper staff. To find unskilled staff may not be a big problem. But for the skilled staff the case may not be same.

About 30% of the country's working population is employed in this sector and the sector is on number to 2 to give jobs, first being the agriculture. It accommodates employee from unskilled to highly skilled.