Realty index

Revival in housing prices is sharper in Tier 2 cities of India than in the big metros, though the latter have seen appreciation in the value of their housing stock. While the slowdown knocked the stuffing out of the residential housing market in 2007, after a couple of painful years, prices are beginning to look up in most cities, the exceptions being Bangalore, Hyderabad, Jaipur and Kochi. Of the 15 cities covered by the National Housing Banks index to track housing prices in the country ‘RESIDEX’, 11 reported a jump in prices in the first half of 2009 from 2007 (base year). While Kolkata showed a dramatic rise of 59% — albeit from a small base — Delhi and Mumbai also saw appreciation upwards of 20%. However the best story comes from Tier 2 cities. Most of these cities, growing fast on the back of local demand and as feeders to larger cities, clocked some of the highest gains. Cities like Bhopal, Faridabad and Ahmedabad showed jumps of 39%, 36% and 27% respectively. With growth in India getting more inclusive and drawing in regions beyond the big metros, these cities exhibit Bharat’s growing purchasing power. Worst hit, according to the Survey, are cities like Bangalore and Hyderabad whose economies are heavily dependent on their tech industry’s demand power. These cities have been witness to a dramatic re-rating of their real estate market in the last decade and consequent rise in realty prices. They have been the worst hit by the slowdown with housing prices collapsing rather dramatically. In Bangalore’s case the fall is a humungous 42%. For Hyderabad the decline is around 35%. In these cities over-supply exacerbated the matter. Realtors who built towers in the sky in the hope that the tech crowd would buy them as soon as they built them, found themselves caught on the wrong foot as a severe recession in the US and Europe hit their businesses. Big cities with a better business mix like Chennai, Mumbai and Delhi, which have strong manufacturing presence and a robust services industry, fared much better with the market recouping faster and posting positive gains. After Kolkata, the biggest rise in prices has been in Mumbai at 24%, followed by Delhi at 21%. As these prices are for the first half of the last calendar year, it is likely that the upturn has further consolidated. Recent surveys by firms has shown that even in cities like Bangalore and Hyderabad prices are beginning to rise on the back of a dwindling inventory, stability in jobs and pay hikes for the prime consumption class — young, middle income couples. According to the Economic Survey, the share of the realty sector in the GDP continues to rise. From 8.9% in 2005-05, it has risen to 9.2% in 2008-09.