"For end users with a genuine need to buy a home, the right time is always now..." – Anuj Puri, Chairman & Country Head, Jones Lang LaSalle India

How has the real estate market behaved over the recent past and what does the road ahead look like?

Of the three primary real estate sectors, commercial property is the most closely linked with global economic dynamics. We are already seeing the impact of these dynamics in the reduced absorption of commercial spaces in India. It is taking longer to close deals – multinational companies are increasingly cautious about committing because their home countries are not doing well. In fact, even domestic companies are in wait-and-watch mode. Developers in India are under pressure, and this is giving scope to occupants to squeeze them even harder despite the fact that rents are already at all-time lows.

Residential real estate is more of a domestic play, with every city continuing to display its own unique market dynamics. Generally speaking, the residential market is currently at a low ebb. Many projects in the central locations of our metros are priced beyond affordability. This has caused a supply overhang in older projects, while newer projects are already being launched at lower rates but are still selling only sporadically. The general sentiment is muted, and buyers are awaiting either a correction in prices or more reasonable home loan interest rates. Even in this scenario though, rationally priced projects are still selling.

There is a possibility of some rationalisation in residential property prices in some of the metros in India. This depends largely on how much stress project developers are under at a company level rather than at a project level. When it comes to residential projects, there is a likelihood of price rationalisations in large townships in the extended suburbs because absorption of residential spaces takes much longer in such projects. For office and retail, we do not expect a correction since rents are already very low and developers cannot go lower.

The health of the retail real estate sector is only very indirectly related to global economic fluctuations. Retail health derives from consumer demand, which is covered by domestic factors such as high inflation and reduced agricultural performance. We will know more by the end of the year, which is the time when salaries are usually revised. If salaries are not revised upwards or remain stagnant, there will be a reduction in consumption power, which will definitely impact retail.

Should investors buy now or wait?

For end users with a genuine need to buy a home, the right time is always now, subject to the availability of a good deal on a property that meets all one’s needs. Investors should choose their city, location and configuration carefully, and look primarily at ready projects or those in the final stages of completion. They should definitely avoid under-developed areas lacking infrastructure.

Could you please explain the regional dynamics in brief?

In Mumbai and Delhi, the residential property rates have already crossed and surpassed the peak levels. However, the inherent demand for residential properties in these cities is very high, whereas the supply is constrained. There have been fewer launches of late, and developers’ input costs have gone up, reducing their profit margins. It is not likely that the residential real estate prices in these two cities will fall in the foreseeable future. If we take a mid-term view of six-nine months, the sales velocities will remain stable.

Some of the smaller cities such as Pune, Chennai, Ahmedabad and Kolkata offer great residential investment opportunities, as the prices are lower in these cities and appreciation is healthy. Again, this is subject to the right location and project.