See little headroom for realty prices to appreciate: CRISIL

Below is a CRISIL Research artcile on the state of the real estate industryAverage residential capital values remained largely stagnant in 2015 in 10 major cities – Ahmedabad, Bengaluru, Chandigarh, Chennai, Hyderabad, Kochi, Kolkata, Mumbai Metropolitan Region, the National Capital Region (NCR) and Pune – tracked by CRISIL Research as demand for residential real estate continued to decline. Prices in NCR, Kochi, and Chandigarh fell 3-6% as sentiment turned bearish. In Q2 2015-16, the aggregate revenue of 29 listed real estate companies increased by 9% but this was largely driven by Godrej Properties, whose revenue rose four-fold year-on-year following the sale of its commercial property in Bandra Kurla Complex, Mumbai, for Rs 14.8 billion. Excluding Godrej Properties, aggregate revenue shrank 6%.We expect average residential capital values to remain range-bound across most cities in 2016 and 2017. Prices in all cities barring Hyderabad are currently well above their 2008 peaks, so there is very little headroom for any appreciable rise in prices in the next two years in the prevailing macro-economic environment. Demand for residential units is expected to recover slightly in the medium term (2% in 2016 and 4-5% in 2017-18), driven largely by upcoming infrastructure projects or commercial drivers.