Most property markets are expected to see turnaround and start pricing in a volume recovery in second half of 2016 at the earliest, said Bank of America Merrill Lynch in a report. It expects the stock markets to start pricing in a volume recovery similar to 2009, supported by further interest rate cuts by the Reserve Bank of India.
Since January, the central bank has reduced interest rate by 125 basis points including 50 basis point reduction in September.
“Historically, stock (equity market) performance has preceded volume recovery by couple of quarters. Although quoted prices in primary housing market have risen in recent past, effective prices are down considering inflation, discount schemes and staggered payment plan offered,” Abhishek Kiran Gupta, analyst Bank of America Merrill Lynch, said in the report.
According to BofA-Merrill Lynch, Mumbai has witnessed a pick-up in demand for housing units, either priced under $0.5 million (Rs 3 crore) or above $3 million (Rs 20 crore). Housing need, discount schemes and mortgage rate cuts triggered demand in under Rs 3 crore per unit segment, while bargain hunting, luxury quotient and lack of investment avenues has triggered demand in above Rs 20 crore per unit segment.
The brokerage is bullish on Bengaluru property market due to pick-up in commercial leasing and affordability despite rising unsold inventory. It has cited pick-up in commercial leasing in 2015 up to levels last seen in 2011 and inflationary rise in housing price ensuring the market maintaining its affordability attracting end-users and investors alike as key reasons for being bullish on the housing market in the city. BofA Merrill Lynch opines that
pick-up in commercial leasing shall lead to pick-up in housing demand with a lag of 4-6 quarters.
Gurgaon property market is under-going a classic property cycle wherein demand- supply dynamics favoring developers in 2010-12 is now favoring buyers in 2014-15. Gurgaon’s unsold inventory has seen an exponential rise over last 2.5 years indicating significant slowdown in sales. The brokerage foresees weakness to stay in this
market through 2015-16 before possible recovery starting 2017 at the earliest.