What is the impact of Interest (Repo) rates on Housing & Housing Prices Appreciation in various cities in India? Is there any direct relationship?

Author: Sachin Gupta | Find me on Twitter Follow @sach_gupta

Ok, everyone including the real estate developers, builders’ apex bodies such as CREDAI, brokerage houses, and other related industries are shouting from the roof tops for interest rate cuts to revive the demand in realty sector. Every time there is a review of monetary policy by RBI, numerous articles in leading newspapers are published on how the rate cuts can boost demand and bring back fence sitting customers in investing in real estate in India. However, RBI has resisted such calls and instead has focused on bringing down the inflation. Now that, inflation has come down, can we expect rate cuts? Mr. Raghuram Rajan knows it best. Let’s leave it to him and his team at RBI.

But, let’s explore, is there any merit in the builder’s argument for reducing the interest rates? Will rate cuts boost demand?

For that, we need to examine the housing price appreciation in various cities across India and the impact of repo rates on housing price appreciation.

Let’s go one by one.

• Appreciation in Housing prices across India

As can be seen from below graph, the pace of housing price appreciation has slowed down since 2010. What does it suggest? Well, it suggests, that demand has been falling gradually since 2010. End-users or investors are postponing their decision to invest in real estate. Assuming influx of new housing supply to be constant from 2010 to 2014.

• Increase in repo rates

Repo rates have increased from 5% in March 2010 to 8% now. Repo rates are rates at which RBI (central bank) lends money to banks or housing finance companies.

• Impact of increase in repo rates on housing price appreciation

This graph tells the whole story. As the repo rates started moving up from 2010 to 2014, the housing price appreciation started to come down. In 2010, most cities witnessed substantial appreciation in housing prices with Bangalore, Ahmadabad, Kolkata, Mumbai, and Chennai appreciated upwards of 30%. Whereas in 2014, the highest price appreciation was witnessed in Pune at mere 3.88%.

• Conclusion

While rate cuts will certainly bring back customers to market and we may see improved activity in real estate investment. However, just like demand waned gradually from 2010 to 2014, similarly, demand will pick up gradually and we may see the full potential somewhere in 2017.

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Housing Prices in India - June 2014

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National housing bank’s residential index for the quarter April – June 2014 has been released and the residential prices in various cities across India have stayed stagnant over the last quarter.

Here is the synopsis:

Hyderabad: Residential prices in Hyderabad have remained stagnant over the last quarter. Marginal increase in Kapra, Uppal Kalan, L.B.Nagar have been noticed.

Faridabad: Residential prices in Faridabad have also remained stagnant over the last quarter of April – June 2014. Areas such as NIT - 1 (NH); NIT - 2 (NH); NIT - 5 (NH); Sector - 62; Sector - 63; Sector - 64; Sector -65; Sector - 21; NIT-3; Sector -14; Sector -75, Sector -76, Sector -83, Sector - 85, Sector – 86 have shown little appreciation.

Patna: Residential prices in Patna have shown an appreciation of 2-3 %. However, localities such as R-Block; Mountasari Lane; Gandhi Nagar; Basant Vihar Colony; Patliputra Colony; Rajapur; Kidwai Puri; Krishna  Nagar; Buddha Colony Part-1; Krishna Nagar Park; Mandiri Kath Pul; Shanti Vihar; Paschim Boring Road; Purvi Boring Kenal Road; RK Bhattacharya Road have shown appreciation over the last quarter.

Ahmedabad: There has been a marginal rise of 2% in residential prices in Ahmedabad. Micro markets of Bhadra, Dudheswar, Gaikwad Haveli, Girdhar Nagar, Wadigam; Gomtipur Gam; Old Viratnagar; Vastral; Zulta Minara; Buddh Nagar; Saijpur-Bogha; Sardar Nagar; Vishnu Nagar have appreciated.

Chennai: There has been 2% price rise in Chennai over the last quarter. However, Perambur; Choolai; Edapalayam; Ayanavaram; Purasawalkam; Kolathur; Virugambakkam; Anna Nagar; Kilpauk; Nungambakkam have shown substantial appreciation.

Jaipur: Residential prices in Jaipur have remained stagnant. Localities such as Khatipura; Kalwar Road; Jhotwara Road; Vidyadhar Nagar;  Sikar Road have shown appreciation of about 5%.

Lucknow: Prices in Lucknow have also remained stagnant over the last quarter of April – June 2014. Localities such as Lalkuan; Wazirganj; Maulvi Ganj;   Gola Ganj; Janki Puram; Daali Ganj; Maha Nagar; Nirala Nagar; Ali Ganj have appreciated by a margin of 5-6 %.

Pune: Residential prices in Pune have shown an appreciation of about 4% in last quarter. Micro markets such as Kasba Peth; Nana Peth; Shivaji Nagar; Hinjewadi; Thergaon; Chinchwad; Baner; Yerwada; Wakad; Pimple Saudagar; Chakan have appreciated by around 8-10% in April – June 2014.

Surat: Residential prices in Surat have fallen by about 2% in last one quarter. Localities such as Rander; Adajan; Jahangipura;   Palanpur; Udhana; Bhestan; Pandesara; Bamroli; Piplod; Vesu; Rundh;Sultanabad have seen 4-5% fall in prices. However, Limbayat; Dindoli; Paravat witnessed about 4% rise in residential prices during the last quarter.

Kochi: Prices in this coastal city has remained stagnant. Areas such as Palariwatam, Panampally Nagar; Thevara; Maradu; Konam; Paluruthi Kacheripadi; Mundavelli; Chullikal have shown about 3% rise in residential prices.

Bhopal: Prices in Bhopal have remained stagnant as well. Localities such as Koh – e- Fiza, Shyamala Hills; Bagh Mugaliya, Katara Hills have shown marginal increase of about 4% over the last quarter.

Kolkata: There has been a rise of 2% in Kolkata residential prices. However, there has been a 5% rise in prices in areas such as Jodhpur Park, Dhakuria; Behala; Thakurpukur, Sorsona.

Mumbai: There has virtually been no gain/loss in residential prices in Mumbai. Lower Parel, Matunga East, Mahim West; Bandra West, Andheri East, Oshivara; Pokaran Road 1 & 2; Mira Road witnessed a rise of 7-8 % over the last quarter.

Bangalore: Prices in Bangalore have remained stagnant. Lavella Road; Richmond Town, Indira Nagar, HAL II & III stage, Domlur Layout, Sadashiv Nagar, Benson Town witnessed a rise of 3-4 %.

Delhi with NCR: Prices in Delhi with NCR region fell by 2%. Most localities witnessed fall in prices except the areas of Mayur Vihar,Dwarka, Pitampura; Noida, Greater Noida, Gurgaon & Ghaziabad; Vasant Vihar & Friends Colony where prices rose by around 4-5%.

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Housing Prices in India remained subdued during the quarter Jan-March 2014

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Property prices remained subdued across major Indian cities in the first quarter of 2014. As per the National Housing Bank data released for the quarter Jan-March 2014, barring Ahmedabad, Chennai, Surat, Lucknow, and Kolkata, most cities reported no appreciation or drop in housing prices.

Hyderabad: In first quarter of 2014 (Jan-March 2014), housing prices in Hyderabad remained static over the previous quarter. Localities such as Kapra, Uppal Kalan, L.B.Nagar registered significant appreciation, whereas prices in other localities remained static or moved downwards.

Faridabad: Housing prices in Faridabad remained static as well during the quarter Jan-March 2014. Areas such as NIT - 1 (NH); NIT - 2 (NH); NIT - 5 (NH); Sector - 62; Sector - 63; Sector - 64; Sector -65; Sector - 21; NIT-3; Sector -14 registered upward movement in prices, whereas areas such as Sector -15; Sector -16; Sector -17; Sector -18; Sector -31; Sector -34, Ashoka Enclave; Sector -37; Greenfield; Charmwood; Spring Field Colony; Adarsh Nagar moved downward. The neharpar region remained static as far as prices were concerned.

Patna: Housing prices in Patna fell in Jan-March 2014 quarter. Prices in localities such as Paschim Boring Road; Purvi Boring Kenal Road; RK Bhattacharya Road increased, whereas all other localities witnessed significant downward movement of prices.

Ahmedabad: Housing prices in Ahmedabad increased by 6% during the quarter Jan-March 2014. Price appreciation of 9.1% was seen in areas such as Bhadra, Dudheswar, Gaikwad Haveli, Girdhar Nagar, Wadigam. However, maximum price appreciation of almost 17% over the last quarter was witnessed in localities such as Abad Dairy; Bhaduat Nagar; Gordhan Vadi; Ramvadi; Vatva Gam; Vishal Nagar.

Chennai: Chennai has been an investor’s paradise offering attractive returns on property investments. Again in last quarter (Jan-March 2014), prices appreciated by about 6%. Localities such as Ayanavaram; Purasawalkam; Kolathur, Virugambakkam; Anna Nagar; Kilpauk; Nungambakkam, Ashok Nagar; Thyagaraya Nagar; Saligramam, Mylapore; Adyar; Velachery; Thriuvanmiyur appreciated handsomely.

Jaipur: Prices in Jaipur fell in Jan-March 2014 quarter. Maximum contraction was seen in Pratap Nagar; Sanganer; Jagatpura; Tonk Road, whereas, prices in Mansarovar Nagar grew substantially.

Lucknow: Housing prices in Lucknow grew marginally during the period Jan-March 2014. Appreciation in prices was registered at Lal Bahadur Shastri Nagar; Nishat Ganj; Gomti Nagar; Indira Nagar, Sarojni Nagar Pratham; Hind Nagar; Sharda Nagar; Om Nagar; Chitra Gupt Nagar. Prices in Haider Ganj Pratham; Saadat Ganj; Asharafabad; Bhavani Ganj; Husaianabad; Daulat Ganj moved downward.

Pune: Housing prices in Pune remained static over the entire quarter of Jan-March 2014. Barring Erandawana; Aundh; Pashar; Kothrud; Bopadi; Vadgoaon Bhudruk, housing prices in all other localities either remained static or fell down during this quarter.

Surat: Housing prices in Surat increased by about 7% in Jan-March 2014 quarter. Localities such as Rander; Adajan; Jahangipura; Palanpur, Katargam; Ved / Dabholi; Amroli; Chaprabhatha, Limbayat; Dindoli; Paravat, Piplod; Vesu; Rundh; Sultanabad reported significant price appreciation.

Kochi: The city did not register any upward or downward movement of housing prices during the first quarter (Jan-March) of 2014. Localities such as Palariwatam, Panampally Nagar; Thevara; Maradu appreciated, whereas Konam; Paluruthi Kacheripadi; Mundavelli; Chullikal depreciated.

Bhopal: Housing prices remained static in this city. While on one hand localities such as Airport Road, Bairagarh City, Punjabi Bagh, Ashoka Garden, Khajuri Kalan, Raisen Road, J K Road, Karod, Ayodhya Nagar, Berasia Road appreciated. On other hand, localities such as Shivaji Nagar, Arera Colony, Chunna Bhatti, Bagh Mugaliya, Katara Hills, Krishna Nagar, Saamra Kalan, Gulmohar, Trilanga, Shahpura, Hoshangabad Road depreciated.

Kolkata: Housing prices in Kolkata grew by 5% in first quarter of 2014. Prices in Ultadanga, Maniktala, Bhawanipur, Alipur, Santoshpur, EM Byepass, Kona Express Way, Shibpur, Santragachi, Nager Bazar, Lake Town, Barahnagar, Barrackpur, Madhyam Gram, Mahestala, Rajarhat grew, whereas Jodhpur Park, Dhakuria, Behala, Thakurpukur, Sorsona, Salt Lake City, Rajpur Sonarpur witnessed downward movement in housing prices.

Mumbai: Housing prices in Mumbai remained static during the 1st quarter of 2014. Prices in areas such as Lower Parel, Matunga East, Mahim West, Kurla East, Tungwa/ Chadivali, Chembur, Malad, Borivali/ Kandivali, Dahisar, Goregaon, Bhandup , Mulund, Vashi, Khar Garh Road, Kalyan, Badlapur appreciated. However, prices in Cuffe Parade, Malabar Hill, Virar, Nala Sopara came down significantly.

Bangalore: In Jan-March 2014, the city registered a marginal drop in housing prices over the previous quarter. Most localities in the city remained static during the quarter Jan-March 2014.

Delhi with NCR: Housing prices in Delhi NCR remained static for the Jan-March 2014 quarter. Vasant Vihar & Friends Colony, South Ext & Sagdarjung Enclave, Vasant Kunj, Punjabi Bagh & Shalimar Extension, Yamuna Vihar, Inderpuri & Rohini witnessed appreciation in prices. However, housing prices in localities such as Mayur Vihar, Dwarka, Pitampura, Noida, Greater Noida, Gurgaon & Ghaziabad, Govind Puri, Raghubir Nagar, Tri Nagar, Dilshad Garden, Karampura, Nirankari Colony, Pandav Nagar, Dakshinpuri, Hari Nagar, Jahangir Puri, Jhilmil Colony, Sangam Vihar, Mangol Puri, Ghazipur Dairy, Khyala(I-III), Sriniwas Puri, Sultan Puri came down.

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Was 2013 really bad for real estate sector in India? Yes, there is data to prove that!

Author: Sachin Gupta | Find me on Twitter Follow @sach_gupta

There were indicators, there were informal chat with property brokers, there were unsold supply of housing inventory lying with the developers, and now there is concrete data to prove that “YES” real estate prices across the country didn't produce yields which one has associated with property sector in India.

Compared with housing prices appreciation in Jan-Dec 2012, the price appreciation remained substantially low in Jan-Dec 2013 period. In fact, certain cities such as Kochi, Jaipur, Bhopal, Kolkata, Delhi, Ludhiana, Vijaywada, Indore, Chandigarh, Coimbatore, and Meerut registered housing price depreciation over the year 2013. Housing prices in Mumbai remained stagnant with no appreciation or depreciation in 2013. Cities such as Chennai, Pune, Surat, and Nagpur registered price appreciation in excess of 6% in 2013.

However, within cities, there were micro markets which fared better when compared with the overall price appreciation in the city.

Micro market price appreciation in 2013 in major cities across India:

Delhi with NCR: Housing Prices in Micro markets such as Yamuna Vihar, Inderpuri & Rohini, Vasant Kunj, Punjabi Bagh & Shalimar Extension depreciated sharply in 2013. Whereas prices in Govind Puri, Raghubir Nagar, Tri Nagar, Dilshad Garden, Karampura, Nirankari Colony, Pandav Nagar, Dakshinpuri, Hari Nagar, Jahangir Puri, Jhilmil Colony, Sangam Vihar, Mangol Puri, Ghazipur Dairy, Khyala(I-III), Sriniwas Puri, Sultan Puri appreciated handsomely.

Bangalore: Housing prices in most micro markets of Bangalore remained stagnant for the year 2013 with marginal appreciation in Jaya Nagar, Rajaji Nagar, Koramangala, Air Port Road, Basveshwar Nagar, Malleshwaram, J P Nagar, Banashankari, R.T Nagar, and Vijay Nagar.

Chennai: Housing prices in Chennai’s micro markets such as Tondiarpet; Narayanappa Garden, Perambur; Choolai; Edapalayam, Virugambakkam; Anna Nagar; Kilpauk; Nungambakkam, Mylapore; Adyar; Velachery; Thriuvanmiyur appreciated in 2013. Whereas micro markets such as Ayanavaram; Purasawalkam; Kolathur, Ashok Nagar; Thyagaraya Nagar; Saligramam, Kodambakkam; Guindy; Chromepet witnessed a downward trend in 2013.

Mumbai: Kurla East, Tungwa/ Chadivali, Chembur, Malad, Borivali/ Kandivali, Dahisar, Goregaon, Bhandup, Mulund, and Mira Road are some of the micro markets of Mumbai where housing prices actually appreciated in 2013. However, prices in Cuffe Parade, Malabar Hill, Bandra West, Andheri East, Oshivara, Vashi, Khar Garh Road, Pokaran Road 1 & 2, Virar, Nala Sopara, Badlapur fell in 2013.

Hyderabad: Housing prices in Kanchanbagh, Begumbazaar, Rajendra Nagar, Qutubullapur, Alwal, Malkajgiri, Begumpet, Marredpally, Tarnaka, Mehdipatnam, Abids, Kachiguda, Narayanguda, Himayathnagar, Tolichowki, Khairatabad(West), Panjagutta, Ameerpet, Srinagar Colony, Somajiguda, Jubilee Hills increased slightly in 2013. While micro markets such as Shamshabad, Kapra, Uppal Kalan, L.B.Nagar witnessed significant price fall.

Pune: Micro markets such as Kharadi, Parvati; Bibvewadi; Dhankawadi; Katraj; Hadapsari; Ghorpadi; Kondwa Khudra; Wanowarie; Undari; Kodwa, Hinjewadi; Thergaon; Chinchwad; Baner; Yerwada; Wakad; Pimple Saudagar; Chakan saw price appreciation in 2013. Whereas Erandawana; Aundh; Pashar; Kothrud; Bopadi; Vadgoaon Bhudruk witnessed price fall in 2013.

Kolkata: Bhawanipur, Jadavpur, Rajpur Sonarpur witnessed significant housing prices appreciation in 2013. While Jodhpur Park, Dhakuria, Santoshpur, EM Byepass, Behala, Madhyam Gram, Rajarhat witnessed price fall in 2013.

Appendix:

Housing Price trends across Indian cities till December 2013.

Data Source:
National Housing Bank

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Housing Prices in India and price appreciation trends across different cities

Author: Sachin Gupta | Find me on Twitter Follow @sach_gupta

How does one justify his/her returns on investment? Simply, by comparing the price point at which they bought and the current/latest price point. Until recently, justifying one’s return on residential property investment was difficult due to lack of credible data. However, now, one can get sense of housing prices appreciation across different cities in India and micro-markets within a particular city. The data is assembled by the team of National Housing Bank and can prove to be very useful for people looking to invest in housing across India.

Here is a trend for housing prices appreciation till quarter July-Sept 2013.

Following point should be kept in mind:
The above chart shows the housing price appreciation across various quarters in different cities. For example, in Faridabad, housing prices have doubled from 2007 to Sept 2013. While in Patna, housing prices have appreciated 1.5 times from 2007 to Sept 2013. However, it does not suggest that housing prices were same in 2007 in these cities.

Observations:

1. Chennai has witnessed the highest housing price appreciation across India with prices increasing about 3.18 times from 2007 to Sept 2013. Within Chennai Ayanavaram; Purasawalkam; Kolathur; Virugambakkam; Anna Nagar; Kilpauk; Nungambakkam registered maximum appreciation of more than 6 times within the same period. While, Chetpet; Egmore saw the lowest price appreciation of about 1.8 times during the same period.
2. Housing prices in Hyderabad and Kochi have depreciated from 2007 to Sept 2013. However, certain micro markets in Hyderabad such as Shamshabad; Kapra, Uppal Kalan, L.B.Nagar have seen slight appreciation during the same period.
3. Faridabad housing prices have appreciated almost twice during the period 2007 to Sept 2013. Maximum price appreciation of 2.34X have been witnessed in the Neharpar region of Sector -75, Sector -76, Sector -83, Sector - 85, Sector – 86.
4. Patna has seen price appreciation of 1.50X during the 2007 – Sept 2013 period. Kankar Bagh; Phoolwari; Bailey Road (New); Gola Road in Patna have appreciated by 1.71X during the same period.
5. Ahmedabad and Lucknow have appreciated 1.91X in this period. Bhadra, Dudheswar, Gaikwad Haveli, Girdhar Nagar, Wadigam in Ahmedabd saw price appreciation of 3.45X during the period 2007 – Sept 2013. While in Lucknow micro markets such as Malviya Nagar; Tilak Nagar; Rajendra Nagar; Raja Ji Puram;Aish Bagh; Raja Bazaar; Sarojni Nagar Pratham; Hind Nagar; Sharda Nagar; Om Nagar; Chitra Gupt Nagar witnessed maximum price appreciation of 2.22X.
6. Housing prices in Jaipur and Bangalore have remained static during the period of 2007 – Sept 2013. However Lavelle Road in Bangalore has appreciated tremendously by 2.61X during the same period. While in Jaipur Agra Road has seen maximum appreciation of about 2.64X in the same period.
7. Pune and Bhopal appreciated by about 2.20X from 2007 – Sept 2013. Kharadi; Hinjewadi; Thergaon; Chinchwad; Baner; Yerwada; Wakad; Pimple Saudagar; Chakan in Pune grew approximately by 3X during the same period. While in Bhopal maximum housing prices appreciation was seen in Koh – e- Fiza, Shyamala Hills.
8. Housing prices in Kolkata grew by 2X from 2007 – Sept 2013. Rajpur Sonarpur; Barrackpur; Bidhan Nagar; Thakurpukur, Sorsona; Bhawanipur witnessed the most significant appreciation. While Rajarhat; Madhyam Gram; Chandan Nagar; Barahnagar grew at below average rate.
9. Mumbai witnessed the price growth of 2.22X from 2007 – Sept 2013. Lower Parel, Matunga East, Mahim West grew at rapid rate of 3.71X during the same period. Vashi, Khar Garh Road, Pokaran Road 1 &2, Kalyan, Mira Road, Virar Vasai, Badlapur grew at below average rate.
10. Delhi along with the NCR region grew at 1.90X from 2007 to Sept 2013. Dakshinpuri, Hari Nagar, Jahangir Puri, Jhilmil Colony, Sangam Vihar, Mangol Puri, Ghazipur Dairy, Khyala(I-III), Sriniwas Puri, Sultan Puri were the fastest growing sub-markets in Delhi.

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