Soaring land prices push Indian property costs up
 

Soaring land prices push Indian property costs up

Sunday, November 21, 2010. Catherine Deshayes @themovechannel

Soaring land prices and higher construction costs could result in property prices rising in India if developers pass on the increases to buyers and concentrate on more profitable luxury projects, it is claimed...

Soaring land prices and higher construction costs could result in property prices rising in India if developers pass on the increases to buyers and concentrate on more profitable luxury projects, it is claimed...

But with sales expected to fall due to price hikes, there is concern that the country's real estate market will suffer if they do.

There is also concern that lenders will charge more so developers also face rising loan costs, especially for land. The Reserve Bank of India (RBI) has already toughened its stance on rising asset prices.

Also, according to analysts some key urban markets such as Mumbai and Delhi will suffer if costs are passed on and buyers are forced to take out higher loans.

While banks have not yet raised rates, analysts believe home loan rates may rise 50 basis points, increasing the borrowing cost. Overall, higher prices and rising costs could hurt demand.

Unitech and DLF, India's top developers have said that raw material costs have doubled year on year in the third quarter of 2010. They are also facing rising labour costs.

But, while developers say cost pressures are likely to stabilise, higher land prices and subsequent pricing are the key concerns. Analysts say developers that have outsourced projects with fixed contracts or whose projects are nearing completion will be less affected as compared to those that are yet to start their projects.

There are also concerns that developers, who promised last year to build more affordable properties, are now retreating into the more profitable luxury real estate sector.

DLF, the country's largest real estate firm has already revealed that an increased focus on affordable housing over luxury has dented profitability. The company's consolidated net profit declined 5% in the third quarter compared with the same period in 2009.

Some believe that prices will fall, especially in Mumbai and New Delhi. They could come down by 15 to 20%, according to Indian real estate consultancy Disha Direct. And Godrej Properties is describing prices in the two cities as being over heated.

A lot of new launches in the country are in the luxury market. The MAN Group has launched its premium residential project near the Dahisar check-naka. The six 23 storey towers project is described as setting a new benchmark in privileged living.

Peninsula Land, Franklin Templeton Investments and Samira Habitats, is to develop a coastal township 20 miles south of Mumbai of which three quarters will be luxury residential villas and condominiums. 

Sunteck Realty, one of Mumbai's top developers, has announced the launch of a brand new luxury residential tower, Signia High, which it claims will redefine high end living for the residents of the western suburbs with 96 lavishly planned apartments and sky villas.

While M3M Group has launched its first project, the M3M Golf Estate, in Gurgaon, targeting high net worth individuals. Luxury apartments will be built around a nine hole golf course. They will have state of the art kitchens, Wi-Fi, roof top jogging tracks, swimming pools and access to a world class club house.

Source: www.propertywire.com


Author - Dan Johnson

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