Big Deals in India Property

Big Deals in India Property

Big Deals in India Property

The india property tiger is on the prowl again. And, it's hunting for large real estate deals. Last few week it start its prey the Rs 4,050 crore deal for a 25,000 square metre plot of land in Wadala, Mumbai. This could indicate that the buyers' appetite for real estate transactions has increased in the real estate market after a lull of over 18 months. Renewed sales, improved liquidity and accessibility to capital has led some real estate developers to look at building fresh land banks.

How do vast ticket deals influence prices of property in the neighbourhood? These set a benchmark for property prices and most have the skill to excite buyer interest and create artificial price situations. The rates of upcoming projects in the area also shoot up following such deals. Property experts contend that the trend will continue and one may see more such transactions taking place this year. Setting a benchmark The questions that such deals raise are: in case of a land auction, would the deal affect prices of projects in the vicin- ity and in case of a secondary sale? Also, would the price set a benchmark for properties in the area or would it remain a one-off transaction.

Property experts think the residential real estate market is a highly `neighbourhood driven business and prices in the vicinity are immediately impacted by such deals, the Wadala deal being a case in point. A day after the deal, the asking price for upcoming properties in the area almost doubled from Rs 8,500 per sq ft to anything between Rs 10,000 to Rs 12,000 per sq ft.

Closer home, when DLF bagged the 350 acres plot in Gurgaon for Rs 1,750 crore in 2009 and paid Rs 1,675 crore for 38 acres of land in west Delhi in 2007, it established a target for land transactions in those areas. Residential real estate is a highly neighbourhood driven business and high value deals have the ability to excite buyer interest. The news of such a deal has the ability to up seller expectations as well as buyer interest, simultaneously creating an artificial price situation. Upcoming projects may also get valued at a higher price following the deal.

However, are these prices sustainable? Not in the lengthy run, Such deals have a tendency to cause market distortions. My concern is that these prices are not sustainable in the long run. There may be a chance of a correction if there is no real demand. As far as secondary sales are concerned, (such as the at the Samudra Mahal a duplex flat in a Worli building that fetched a price in excess of Rs 36 crore at an auction a few months ago) property experts are of the view that such transactions are not representative of the residential market but can safely be considered one off sales.

Though it's true that highend apartments will continue to fetch high values, a small sized apartment in the same area (where a big-ticket deal has taken place) may not fetch the same price as pedigree buildings are very few and not all flats are of the same size. The size is what will matter if one were to draw comparisons.

Secondary real estate market deals are top considered as one-off deals. One has to see these announcements of trophy deals watchfully. Some command a premium due to the snob value attached, emotive reasons such as a earlier history and in some cases the convenience reason. An isolated deal is not indicative of a pricing trend of india properties.

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