Real estate trends had gotten highly opinionated and PR driven with no one laying facts to back their views. NHB Residex is perhaps the first attempt to scientifically base property trends and Kochi has been included as one of the 13 cities covered. National housing bank at the behest of Ministry of finance takes only actual transaction price to reach the index price. For Kochi 2007 was taken as the base price and the trends are being evaluated on a half-yearly basis.

Though the Jan-july 2009 reports are still awaited the earlier report gives some insights into locations and may help arrive at where to invest. As per the report the Mattanchery zone has shown the overall highest positive return with an 8% growth from 2007. However, the prices indicated in this territory has been volatile.  The Central zone comprising of  Fort Kochi Vili, Karugapalli,Venella, Mammankalam have shown highest stability and a reasonable appreciation. Prices have come down by around 5% in these areas. Elamakkara, North,,Podukalavattom have depreciated by around 6% from 2007 levels. Panampilly Nagar, Maradu, Thevara are the other premium destinations owing to proximity of the city and her the rates have come down by around 8% vis a vis 2007 rates. However rates in these areas have recovered from their early 2008 lows. There is no mention on Kakkanad which we suspect was the worst hit in the crash. Prices are down by around 205 from their 2007 highs. The over supply situation continues in this zone. The Vytilla zone has seen a marginal depreciation of 10% from their early 2008 highs.  However when compared to 2007 prices the decrease is only marginal. While too much cannot be read to the NHB Residex at this point we believe that as the number of data points increase over a period one would be able to do some meaningful interpretations and this would come to the aid of investors.

For those looking at opportunities here is a snapshot on asking prices we have gathered  in some of the areas.

Panampilly Nagar     Rs2750 - 3300
Kadavanthara            Rs.2600 - 3000
Thevara                        Rs.3500 - 4500
Chilavannoor             Rs.3000 – 3500

Kaloor                           Rs. 2800 - 3000
Palarivattom              Rs. 2600 - 3000
Edappally                     Rs.2800 - 3400
Vyttila                           Rs.2600 - 3200
Kakkanad                      Rs.2500 -2800
Marine Drive              Rs.6500 - 8000
Aluva                              Rs.2000 – 2600

These are just indicative rates. Primarily the rates depends on location, accessibility, builder, facilities etc. So go drive a bargain.

‘Luxury’ was the keyword in the last boom with Kerala builders, all and sundry focusing on the same segment. Yes, kerala was a consumer market and NRI’s and malayalees domiciled in other parts of India were the target customers. Yes, a lot many in this  audience have seen the best of places and have a concept of quality. They lapped the offerings at a ‘premium’ without too much of a difficulty. Yes some of them even went in for a second place with borrowed money, but then that was it. The frenzy was such that anyone who could afford or were eligible to finance have bought one or more properties in Kerala or elsewhere. So, assuming most of them have leveraged themselves out let us see as to what could drive the next boom.

The fact is that for the market to expand you need a new set of buyers. So who would that be? To find this out we will have to do a  bit of math and look at the logic. Let us assume that the price per square feet for a standard apartment in the major cities/towns of Kerala averaged Rs.2300. Assuming that the standard size off a 2 bed room apartment is 1000 sq ft, that works out to 23 lakhs + registration to work out to  roughly Rs. 25 lakhs. At that price assume bank financing upto 80% (Banks right now are quite wary!!) which is 20 lakhs. At an approximate monthly instalment of Rs.1000 per 1 lakh for a 15 year loan that would work out to Rs.20000 a month as EMI. Banks while checking borrower’s eligibility look at a limit of say 60% of free cash flow toward the EMI. This means one needs have a minimum monthly salary of say Rs.40000 to qualify for a loan of a that size. That leaves one guessing as to how many would qualify. The answers for the builders are available right there.

The next boom will have to driven by the concept of affordable housing in kerala. Right now this is an exception. Affordable housing does not mean builders cutting corners and quality getting compromised. The system will correct itself to work with greater efficiency and delivering quality output to the buyer at affordable prices.

Buyer complaints on endless delays in project/property handover is now commonplace. There are enough number of cases where delays range from a mere 3 months to 1.5 years in some cases with no firm commitments. True, builders have been caught on the wrong foot by recession but that hardly justifies the concerns of buyers. Real estate in Cochin, Real estate in Calicut and Real estate in Trivandrum have been the worst hit in Kerala.
One major reason has been that many builders went on a land buying spree during the real-estate hey days and paid big rupee for creation of land banks on the assumption that the market is uni-directional. They over stretched and over leveraged in their rush to acquire properties. Money from launched projects were first diverted into this act in the hope that the cash cycle would take care of itself. With the market crash, builders including many of the big ones found themselves with huge assets and dismal cash flow. The only option was to sell some of those assets at hugely discounted values which is what some of them have been forced to do.
Invariably, all builders have delayed projects testing the patience of many a buyer. Remember, a lot many of these buyers paid a premium during the boom to book properties and if they were to sell it today it is likely to be at a loss. Many of these buyers have taken finance and this is a cost which they have to bear for no fault of theirs. Opportunity loss in terms of rentals is also to be considered. Of course the fine print on the contract provisions for nominal compensation from the builder but would that suffice?