REAL ESTATE REVIVAL STORY BEING SCRIPTED BY INVESTORS: ANALYSTS

The real estate revival story is beingdriven by the residential segment, but contrary to the claims made by a numberof developers that end-users are their main buyers, the current trend is beingdriven by investors.

“These are investors who are takingan opportunistic view of the situation where prices have corrected considerablyin many locations,” says Sanjay Dutt, CEO business at Jones Lang LaSalleMeghraj (JLLM). He estimates that a good 40% of the stock sold in the last fewmonths would have gone to investors. InDelhi-NCR, this figure might be higher at 50%.

“Investors are back in good numbersand before the curve goes up, they want to buy. Some who have bought arealready hoping to book profits during this Diwali,” he adds. This could be aprecursor to further improvement in investor sentiments, since investors wouldtake this as a sign to look towards a sustainable run in the future.

Investors took flight from the residential real estate market whenthe market crashed last year and many have been shy of venturing back. The lastfew months though have seen a number of affordable launches at price points,which have stimulated the market. Most developers have launched mid-incomehousing in the Rs 20-40 lakh range, which has created a movement.

While the short-term investor isthere, interestingly, a good number of the investors are medium to long-terminvestors. “These investors are flocking to real estate because of the lack ofother investment opportunities in the market at the moment,” says AjitKrishnan, partner, real estate practice at audit firm Ernst and Young who feelsthe trigger for these investors was the drop in price points in the residentialsegment in the last eight months.

These investors are not purelyspeculative and are investing in realestate as a shelter against inflation, he says. Other investmentopportunities today do not yield the same results.

Developers on their part areinsisting that a majority of the buyers in their projects are end-users. Asthere is no set way to differentiate investors from end-users, Unitech looks atconsumer behaviour to judge one from the other. “Investors usually are not toobothered about specification details, do not go for site visits too often. Wehave not seen such behaviour at our projects. It appears that a large majorityare end-users,” says R Nagaraju, general manager of corporate planning atUnitech.

Wherever prices have been broughtdown to attract customers, there have been investors but Aditi Vijayakar, executivedirector, residential services at Cushman & Wakefield says these investorsare mostly long term. “These investors are using this decline in the market tobuy another property which they can decide on selling after the project isdelivered,” she adds.

Alongside investors are endusers whoare mainly interested in completedhomes. “The question is of consumption. We are definitely seeing movementin completed properties which are being picked up end-users,” explainsKrishnan.

Prices in the residential market inNCR-Delhi and Mumbai have started to climb up in the last months or so andVijayakar warns that it is a little too early to raise prices. “In the mediumterm, it will not be sustainable for developers,” she says. There is a concernthat the few end-users who have started to show interest might be deterred frommaking purchases if the prices of homes keeps rising.

Courtesy:- ET dt:- 08-09-2009