Real Estate

No correction in real estate prices expected despite slowdown: JLL

MUMBAI: The rents of commercial real estate are unlikely to correct despite a demand contraction of about 15%. The Indian residential property market, on the other hand, see a definite slowdown in new launches already, and this is likely to continue for the interim. But the real estate price in cities such as Mumbai or Delhi is unlikely to lower, Jones Lang La Salle said in a statement.

Mumbai and Delhi have emerged as chart-busters in residential real estate market. "In these cities, residential rates have already crossed and surpassed the peak levels. However, the inherent demand for residential properties in these cities is very high and supply is constrained," Colin Dyer - Global CEO of international property consultancy Jones Lang LaSalle.

There have been fewer launches of late, and developers' input costs have gone up, reducing their profit margins. "It is not likely that residential prices in Mumbai and Delhi will fall in the foreseeable future. On a more general note, there is a possibility in residential corrections in some cities, depending on the level of stress project developers are under at a company level, rather than at a project level,: he adds. When it comes to projects, there is a likelihood of price rationalizations in large townships in the extended suburbs, because absorption of residential spaces takes much longer in such projects.

The Indian real estate market is faced with challenges such as high cost of liquidity for real estate, the lack of availability of serviced urban land, continuing procedural delays in approvals, the slow pace of infrastructural growth and relatively low transparency in real estate terms.

On commercial, real estate Jones Lang LaSalle expects supply correction for 2013 and 2014 even as the supply for 2012 is by and large on track. "The market will continue to be under stress for another four quarters, with vacancies going up, but rents are unlikely to fall further as they are already at the bottom," says Colin Dyer - Global CEO of international property consultancy Jones Lang LaSalle.

Vidyalaxmi, ET Bureau