It's good news for home-owners, but not-so-good news for aspiring home buyers. Real estate consultancy Knight Frank says that despite the sluggish demand seen in the residential property markets over the last year, residential property prices are going higher, reports CNBC-TV18's Alexander Mathew.
Residential sales in India's top-six cities have fallen 17 percent in 2014. Normally, this low demand would drag prices down, but Knight Frank says that given a sharp decline in new launches, prices are actually heading higher.
For example in Mumbai, where new launches were down 43 percent in 2014, prices went up by 10 percent on average.
What's more, prices are expected to rise further as 2015 unfolds, though a sharp upswing may not be on the cards.
Samantak Das, Chief Economist and Dir – Research, Knight Frank said: "We expect that the combined six cities together, the sales will go up by 4 percent over the same period last year in the first half. However, the launches will still fall by 4 percent. There is always an upward pressure in price. However, we don't see much significant increase in price in the top six cities going forward."
It's not just residential property prices that are on the up. Commercial real estate prices, both rental and on sale, are also rising.
That's because new launches have dropped 6 percent in 2014, and absorption, or demand, is up 14 percent, with vacancy levels shrinking to 17.5 percent from 19.6 percent.
Unless more development begins soon, the supply crunch will lead to a further rise in rental costs.
Viral Desai, Director, Occupier Solutions Group said that with good support from government to incentivise developers to do more commercial real estate, there will be a balancing act. Otherwise, rents will increase by 10-15 percent in the next 12 to 15 months.
But all that won't happen overnight and so, Knight Frank says that while the first half of 2015 will see some consolidation by developers, it's the second half that will see them get any actual traction in sales.
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