Will she? Won’t she…

By Sanjay Chaturvedi

Real Estate Market will fall. Real Estate Market will continue to rise. These are the subject of the Talk-of-the-town. Hundreds of e-mails and letters are coming in with the question.
For fall the view express were : the market will have its correction phase since lot of supply is lined up in the near future. Huge construction activities and primary land purchase is now over. Land and FSI is likely to come to the real estate market like 600 acres of Mill Land, vast track of land in the western suburbs, huge factories in eastern suburbs between Kurla and Mulund, prediction on TDR relaxation, 33 (7) will come sooner or later and Navi Mumbai and Mira Road will absorb the over flow of growing demand.
Actual user will stop buying since the rates have gone beyond affordable limits. Investors will panic and actual user will bargain. Stack market is having direct relation with real estate market and when it falls, real estate market will feel the pinch.
On the other hand, REITs, Realty Funds and Venture funds are waiting on the horizon to buy real estate from investors and directly from the builders which will make the supply at low level for individual purchase. Funds will trade in real estate and capitalize on the rental income which never got regularise as market trend. Hence the market will continue to grow as far as property rates are concerned.
Mill land will not come to the market in next two years since it takes time for permissions, planning etc. It will not be viable proposition if residential accommodation are constructed since the FSI cost is more then the finished commercial stock. TDR, 33(7) and other issues are waiting court verdict and estimation on the courts order in favour may prove a wrong decision. Navi Mumbai and Mira Road and other suburbs outside the limits of Mumbai cannot break the demand trend in the city.
As far as investors and speculations are concerned, the situation is different from 1995 boom. Actual users are having money to save under the Income Tax exemptions under Housing Finance schemes. Going in for second home instead of paying taxes is a better option. Salaries are rising and easy home loans are available hence the affordability have increased many folds since 1995. Only hitch is margin money for fill the gap between Loan to value and Actual value of the property. This also is not great hurdle since private finance and institutional finance options are available.
REITS and mutual funds will certainly fuel in the property market will hold its value for next three years when bifurcated supply comes in the real estate market. Hence she will continue to grow as of now. A small correction phase is eminent when investors roll over the settlements but it will be a minor correction.

Posted on 19th April 2006