Real estate Sector

Office space rentals in India are expected to fall up to 20% in the next three quarters, with key cities like Delhi and Mumbai slated to witness a sharp decline of 50%. According to the global real estate consultant Jones Lang LaSalle (JLL), the decline in property prices in India is expected to continue through the year with office rentals expected to fall by 15-20%, as the slowdown-hit realty sector is likely to see a recovery only in the second half of 2010.

"The largest decline in rentals is expected in Delhi and Mumbai, expected to halve its peak," JLL said in a report on global market perspective. The consultant further said the office rentals in Chennai, Kolkata, Hyderabad and Pune are expected to decline between 30% and 40% from their peak during the next three quarters, while the same in Bangalore will fall 15-20% from its peak. On the current economic scenario, the report said the recent gains in the equity market propelled optimism in the economy and if it continues, a recovery is expected by early 2010.

"Although the effects of this upturn would start showing signs in the real estate sector, the gains would definitely come in second half of 2010, when fresh demand again builds up in the market and the latent demand suppressed on fears of a downslide comes back," it added

After witnessing an acute slowdown during the third and fourth quarter of 2008, the real estate sector has shown some recovery in the first quarter of 2009 ending March 31. If trends of absorption for the period January-March 2009 are any indication, a report prepared by PropEquity Research suggested there has been a surge in absorption in majority of the cities. A recent study conducted by PropEquity across Mumbai, Bangalore , Chennai, Hyderabad, and Gurgaon in NCR reveals that absorption has been high among the residential new launches in the first quarter of 2009 in Mumbai, Chennai and Gurgaon.

The study attributes the success rate in absorption to the price correction and reduction in unit sizes introduced by developers in these cities. However, Bangalore and Hyderabad, which witnessed fewer new launches during the period, experienced a low absorption.The real estate sector experienced one of the worst kinds of slowdown in demand because of rise in the interest rates in the January-March 2008, by almost 2 percentage points, to 12%. At the same time, the prevailing prices of residential apartments in most of the cities made them unaffordable for most buyers. The situation further worsened after global financial markets got affected due to the failure of banks and brokering houses in the US and Europe.

This also affected Indian real estate market very badly and demand plummeted. According to the report , While October-December 2008 saw the nadir with absorption of only 1,113 units in Mumbai, the first quarter of 2009 witnessed the launch of over 14,478 residential apartment units and a corresponding absorption of 5,746 units. As against this, during October-December 2008, 3,096 units were launched, the report said. That means, in the first quarter of 2009, 40% of the launched apartments were sold, which is consid