Developers holding on to their rates with the hope that the real estate market will bounce back to normal soon might have to wait till the end of next year.
According to real estate consultancy Jones Lang LaSalle Meghraj (JLLM),realty prices in the residential market are not likely to be buoyant until mid-2010 while the commercial and retail market will stagnate until late 2010.
JLLM says price corrections are happening more in launches than in existing projects,in which the developers have already recovered their costs by selling a majority of the stock to investors. It claims that a price correction of 30 per cent has already taken place. However,sales are still low owing to weak buyer sentiment given the uncertain job market. The consultancy predicts Rs 1,800-Rs 2,000 per sq ft as the bare minimum pricing level in the existing market.
In the commercial market,the demand is expected to drop to less than half the 2005 levels to 21 million sq feet this year. Rents too are expected to stabilise at the 2005 levels. As the rates in metros and Tier 1 cities see a sharp correction,Tier 2 and 3 locations will lose their competitive edge in terms of lower pricing. JLLM points out that rents have fallen by 40 per cent.
For example,in Bandra Kurla Complex rents are down from Rs 450 to Rs 260 a sq ft. Vacancy levels across micro markets are likely to increase through 2009. Even well-established business districts are likely to face high vacancies, said Anuj Puri,chairman and country head of JLLM.
Predictions for the retail market also say a stabilisation is expected only in late 2010,after the supply tapers as more and more launches get shelved or converted into residential or commercial space. With less spending on retail,retail rentals are being renegotiated downwards by 20-30 per cent.