Home prices in metros rise over 50 per cent in 4 years

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NEW DELHI/MUMBAI: Home prices have appreciated by an average 66% in Mumbai, 52% in Gurgaon and 46% in Bangalore over the past four years, with some pockets growing nearly 100%, say property consultants, belying hopes of fall in property prices.

A limited supply of clear land, demandsupply mismatch and rising cost of inputs like steel, cement and labour have contributed to the rise in prices in most locations. "On the demand side, affordability is getting better as salaries have increased by at least 10-12% per annum in this period helping home buyers take a decision," says Niranjan Hiranandani, co-founder & chairman of Mumbai-based Hiranandani Group.

In addition, corporate investments have turned uncertain, and therefore, investors have moved to real asset classes like real estate and gold, which have became more attractive and offered better returns.

After the Lehman crisis in late 2008, property markets started to recover by 2010, but at that point, there was a huge demand-supply mismatch as many earlier projects got stalled due to the slowdown. This pushed up prices in the ensuing period, says Ajay Chandra, managing director of Unitech.

Rise in cost of construction too has been a big factor in the increase in prices. In the four-year span, construction cost has gone up by at least 30-40%.

"In this period, price of commercial space has hardly kept pace with inflation while residential property values have gone up significantly, but in select pockets of larger cities. This is a forward indicator of a positive upward trend for residential property values in the future across the other larger Indian cities," Anckur Srivasttava, chairman of GenReal Property Advisers — a real estate consulting firm.

In Mumbai though, there were other factors at play. For instance, approvals, especially environment clearances, took a lot of time in this period and because of this, most projects got delayed. "Now it takes more than two years for an approval that used to take six months earlier," says Hiranandani.

He also points to different taxes that have put pressure on pricing — be it ready reckoner rates, development charges, valueadded tax. All of these have shot up in these years. In the past four years, direct and indirect taxes together too have moved up to 32% from 12-15% in case of affordable house prices. "You name any tax or charges, and that has gone through the roof during these years," he says.

Residential property prices in some parts of Mumbai have grown even faster. According to Jones Lang LaSalle, property prices in Thane have risen by 70% in the four-year period while Navi Mumbai has seen an escalation of 74% and the Malad-Borivali belt has seen an increase of 85%.

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