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Rent Reaction


Rent Reaction

Last updated: June 4 2007
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  • Rent Reaction

    This may be of help..
    The talk of the town in the real estate market is the rising rental and leasing market. The residential market has seen a drop in actual transactions, which is giving a push to the rent and lease market. “Residential capital value had become skewed, and capital values may correct a bit now.

    Rents will increase by at least 20-25 per cent because people right now are postponing their decision to buy a house. There will always be demand for rental houses,” says Pankaj Bajaj, MD Eldeco Group. “A slight slow-down in the market was necessary as the prices were increasing exponentially in this sector. People were finding it difficult to cope with the rising EMIs. This is a kind of correction,” says Punit Beriwala, MD, Vipul Ltd.

    The trend has picked up over the last two months because of reduced investment as a result of the RBFs hike in interest rates. But there has also been a drop in the number of flats available for possession. Most of the projects are under construction and will take two to three years for completion.

    The slump in the supply of residential units is because developers do not have the money at their disposal to complete projects. “In the last six months, people have stopped buying. Apartments are few; the main issue is that the developers do not have money. If the problem of finance for the developer persists, then the small players will be wiped off the scene. It is a good sign for the market also — everyone jumped into the fray as property agents. If the scenario stays, then everyone will have to go back to their original portfolio and quality will emerge,” says Sunder Lai, Senior Advisor, Sahara Infrastructure and Housing.

    Market analysts are seeing the increase in the rental market as a blow to the unrealistic trends in the sector. However, they refuse to believe that the market will drop once developers tide over the reduced availability of apartments.”North India had become unrealistic. The trend can also be witnessed in the small towns. The correction might take a year. But rental market rates will not come down even after this. Interest rates are also a factor.

    If the rates come down, then we might see some decrease in the rent and lease market. Even if there is a drop of 100 basis points, the market will go up,” says Sunder Lai. “One more reason for the rise in increasing trend in the rent and lease market is the 30 per cent tax haven that people enjoy from rental income,” informs Subhash Lakhotia, tax and investment consultant. He says that the trend will pick up in the coming years. “As in America, the trend of leasing out is gaining importance through REITs. People will buy apartments in bulk and then rent it out, or will buy a mall and lease out the shops.

    This will happen soon as we are waiting for the SEBI’s approval regarding REITs, which has been in the pipeline for the last decade or so,” says Lakhotia.

    Source: Hindustan Times
    So rent's will go up..
    Manoj Misra

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