The report highlights the revised service tax and its impact on the consumers, the deduction in TDS and the current scenario of the External Commercial Borrowing (ECB) apart from its emphasis on the Chennai Realty Market.
Following are the key takeaways of the report:
– Chennai leads the market in terms of number of units under construction accounting for 68% of the total number of units coming up in the city, followed by the western region with 27%.
– Chennai is slated to witness the infusion of around 67500 residential units in the forthcoming three years.
– During 2011, the highest price rise was observed in the central areas of the city, to the tune of around10-18%.
– According to a United Nations study, Chennai has a deficit of around 60000 housing units. About 6000 of them are in the high income group segment, 12000 in the middle income group and 18000 in the low income group.
Since the sales of residential realty are diminishing gradually these days, it is expected that the real estate companies will experience decline in the first quarter of financial year 2010-11. However, it cannot be ignored that the office market is picking up with the economy.
As per the data collected by leading stock brokerages show, it is expected that in the June quarter, the realty companies will undergo around a 20% growth in the net profit and a growth of 38-40% in net sales. As per the data of last year, there had been a net profit of over 80% which certainly brings the conclusion that market has experienced a decline in sales and profit.
A stock analyst with a Mumbai-based brokerage said that as compared to the June quarter of financial year 2010, the numbers look somewhat flat in this financial year.
For instance, the gross margins of DLF were 49% and had a growth of only 4%. Similarly, Unitech’s net profits had a growth of just 1%.
Towards the end of 2009, remarkable appreciation in values has been observed by the residential markets across big cities of India. Report by Wakefield and Cushman informed that in the two key residential markets in India, Mumbai and NCR, this trend is most prominent. In these areas, as compared to the same period of last year, values in Oct-Dec 2009 were appreciated.
Since Mumbai and NCR are one of the high demanded markets, both from the investors and consumers, it witnessed a faster recovery than other cities. As a result of economic slowdown, these investors were backing out their requisites which had brought a kind of uncertainty in the job markets. But on the other hand, this slowdown brought affordable housing to the consumers which in turn led to sharp upward correction in the capital values and strong recovery in the economy.
Since in NCR, a large number of projects were sold out as soon as they were launched, it can be concluded that the demand for the housing which seems to be affordable, i.e., ranging from 20 to 40 lakhs was quite high. Recently, 500 flats offered by Supertech in Noida at a cost of 9.75 lakhs are sold out just after its launch. Due to the new trend, volume of transactions has been aggrandized.
However, this trend can continue only if the government takes back the extra burden of the 10.3 percent service tax which was announced in the budget 2010 on the sale of flats before there completion. This may make the projects under construction more attractive.
The reactions to real estate market are mixed. The looking up of this market in the US economy has raised some hopes in the Indian markets too. Various real estate companies have expressed that the market is looking up, and is likely to improve in the coming days, but some companies are skeptical and want to see actual results flowing in before commenting.
There has been some increased activity on the real estate market front in the recent weeks and this has raised some hopes. The media also reported that the prices of houses would not drop down further indicating that there is stability in the market.
The following weeks would be crucial and they could decide which way the market would go in the coming weeks.