It doesn't take much for residential realty prices to move upwards; with just a slight improvement in sales, prices at projects that were
once stalled start inching upwards. It is all part of basic real estate marketing strategy. Prices move up when actual deals take place but the scenario in 2009 is a bit different , says Pankaj Kapoor, CEO of real estate research firm, Liases Foras.
He cautions that "If residential realty rates rise at this juncture, it will again take the market back to a scenario of stalled sales, similar to what was prevalent during the end of 2008," he points out.
Realtor Ramprasad Padhi feels that there has not been any significant revival in sales. "The marginal improvement in sales has been mistaken by some builders as signs of 'the next wave' . In reality, it has been a combination of pent-up demand and accumulated stock being disposed off at lower prices" shares Padhi.
Potential buyers, he says, find the new, increased rates 'unjustified' , even if it is higher by just 10 to 15 per cent.
In Mumbai, around 25 to 30 per cent of hitherto fence-sitting home buyers have now begun initiating purchases or indicated serious purchase decisions , says Pawan Swamy, MD (west India), JLLM. "The current sales figures are a vast improvement over the depressed market scenario six months ago. Developers who have been successful in selling a sizable component of their projects are now beginning to test price elasticity" he adds.
"At present, these price escalations seem to be limited to certain mid to high-end projects, in preferred locations. If the trend percolates down to a wider spectrum of market segments and locations, we may see prospective buyers once again display circumspection and hesitation to buy," feels Swamy.
We are at least a year away from the next real estate upswing, cautions Chaitanya Parekh of the Soham Group. "In the second half of 2008, several developers started reducing the sizes of the units they offered, aiming for a different customer profile. Now, if there is any increase in the price, the whole objective will be lost," he points out.
The writing on the wall seems clear - price hikes will clearly have to wait, at least for now.
