Metro property prices to take a beating

In the 1999-2000 fiscal, the report said property values are expected to remain subdued in Delhi, Mumbai and Chennai. However, Hyderabad and Bangalore will buck the trend, it added.

The key demand generator which held prices from falling further in 1998-99 came from the multinationals and Indian corporates which continued to rationalise their occupancy costs.

The report pointed out that vacancy levels in existing stocks continued to be high due to reduced transaction costs, resulting in oversupply in most markets.

In the second half of the year, multinationals and Indiancorporates acquired sizable property in suburbs particularly in Bandra Kurla and Andheri-Kurla in Mumbai, Gurgaon in Delhi and Whitefields in Bangalore.

In Delhi property market, the report said, transactions were driven largely by end-user segment demand even as supply outstripped demand.

"The market has seen comparatively more of lease transactions as compared to instances of sale as landlord are trying to minimise asset holding losses and occupiers are in the process of rationalising occupancy costs," the report added.

The property prices are likely to remain subdued in 1999 and driven by the serious occupier segment.

On the residential property front, the report said demand for higher-end housing was largely driven by expatriates and middle to higher income end users. "Despite sluggish market conditions, prime residential apartments are still witnessing moderate transaction activity as their valuations have become attractive," it added.

In the Mumbai property market, the report said negativeinvestor sentiment and continuing political instability at the state level has seen a correction in real estate values.

In New Delhi a primary trend witnessed in has been one of "decentralisation," wherein a number of prominent companies have relocated to cheaper suburban locations. "Lower prices, need for larger floor areas, reduced travel time have contributed to this relocation," it added.

Commenting on the outlook for next year, the Jones Lang Lasalle Report said land supply is expected to increase in Mumbai as a result of the proposed repeal of Urban Land Ceiling Regulation Act (ULCRA) and relocation of slums out of the inner city.

However, Bangalore property prices are seen to be bottoming out with stability in values being seen in the last quarter of 1998-99. Demand has been adversely affected by the relocation decision of software companies to Hyderabad, due to lower real estate and manpower costs as well as comparatively better infrastructure. "However, market sentiments remain strong thatprices will remain stable through 1999 and see an increase in 2000," the report predicted.

What has been the loss of Bangalore has been the gain of Hyderabad. The real estate market in Hyderabad has been quite buoyant over 1998, with the influx of a substantial number of corporate occupiers, mainly information technology companies and proactive government policies.

Various government initiatives like enacting new building norms and simplification of municipal laws have helped the growing real estate market in Hyderabad. "Property values in prime areas and new developments have seen an upward trend," it added.

However, in Chennai, real estate values stood stable with moderate transactions since the second quarter of 1998-99. The city has witnessed a correction last fiscal, though not to the extent as in Mumbai and Bangalore.

The city continues to attract multinational corporations, largely due to the political stability, adequate infrastructure and comparatively lower cost of real estate.

The reportpointed out that there has been a significant reduction in sales volume in commercial and residential sectors. Over-supply continues to dominate the market trend, which is likely to remain unchanged in 1999, it added.

Jones Lang Lasalle, created in March 1999 through the merger of United States-based Lasalle Partners and London headquartered Jones Lang Wootton, has about 20 billion dollars worth of assets under management.