by Mr. Rohan Sharma, JLL India
The
whole country (India) was recently abuzz
when the price of onions (one of the most essential staples of the Indian diet)
rose above the price limit of Rs. 100
per kg (that’s nearly USD 0.75 per pound) in the country’s capital and
surrounding areas.
The
reasons for this were a crop affected by unseasonal rains & hoarding by
suppliers and a few large farmers to create an artificial supply shortfall.
This story finds a parallel in the country’s residential sector.
This
sector is characterised by delays in project possession & healthy interest
by investors who are not end-users but speculators looking for capital
appreciation.
 |
| Rohan Sharma, JLL India |
Onions
and Housing Sector..
There
is a certain similarity between onions and the housing sector because both are
commodities that fulfil an important need - providing food and shelter.
In
2008 - 09, when housing demand was adversely impacted by the Global Financial
Crisis & investors and end-users deserted the residential market, prices
tumbled by over 30 % across different markets.
The
subsequent revival in demand took place in 2010 and it was accompanied by a
revival in price as well.
Prices have risen by about 50 % from the market trough seen in 2009
& are trending at newer market peaks
in most residential markets. The healthy buyer interest over the 2010 - 2012
period was the leading factor in driving prices upwards but this is not the
case in 2013.
A
major factor in the demand revival has been the active investor interest in the
residential sector.
In
fact, in select cities & corridors such as Gurgaon in the Delhi National
Capital Region (NCR), the investor momentum has managed to marginalise
end-users, who are relatively risk-averse.
By
investing in projects which have partial approvals, the investors have taken
away a large chunk of the upcoming residential supply & this has been
motivation for developers/ promoters to offer their thus limited stock to
end-users at higher prices.
This
has started to happen more regularly & has made many residential corridors
more speculation-driven.
Back
to the onion analogy, over the years, onions have seen stable prices (prices
have remained at Rs 22 to Rs. 32 per kg) as supply has been synchronised with
demand.
Healthy
profit..
The
wholesale market which hoards the commodity can be equated with the investors
who keep end-users away from the market for short-term gains.
Farmers
- the onion producers who make a healthy profit in a short - supply scenario by
selling at higher prices are analogous to developers / promoters who look to
book returns from their projects by ensuring that buyer demand is always
chasing lower availability.
The
difference lies in the fact that the government intervened in the essential
commodities market by importing onions to control price rises. No such method
of control currently exists in the housing sector.
Perhaps,
beyond the normal income tax payable on house rent income (payable even for
non-rented accommodation), some more punitive measures can be implemented to
achieve better “price discovery” in the housing sector.
About
the author..
Mr.
Rohan Sharma is Senior Manager ( Research & REIS) at Jones Lang LaSalle in
India (JLL India)
Fro
Media Contact:
Arun Chitnis- Head
– Corporate Communications & Media Relations
Jones
Lang LaSalle India
Level
6, Amar Avinash Corporate Plaza
Bund
Garden Road, Pune - 411 001.
Tele:
020 3093 0441 Fax: 020- 40196101
Mob:
+91 9657129999
Website:www.joneslanglasalle.co.in
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