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Time of India

‘Construction came to halt during 1971 war, house rents didn't jump'

Mumbai: What impact can a war have on the real estate industry? According to real estate consulting firm Anarock Group, construction came to a standstill during the 1971 Indo-Pak war. In Mumbai, the state govt "put an iron grip" on cement and steel, which resulted in a 12% reduction in approval of housing projects, said Prashant Thakur, regional director & head, research, Anarock Group, adding that property registrations in the city reduced by almost 10% in 1971. However, housing rental rates did not spike, even though inflation raged out of control, since rent control laws were not then, there were no FDI inflows worth mentioning and the development of private office spaces came to a grinding halt. "Locations like Mumbai's Fort area and Delhi's Connaught Place saw massive vacancy rates. However, office rentals did not sink because of limited supply and due to inflexible regulations," said the Anarock report titled 'Exploring War's Effects on Indian Real Estate—When Conflict Meets Concrete'."India's high-street retail scene was mostly unorganised and uncharted, but local shops in Old Delhi and Kolkata saw a significant drop in footfalls. According to court records from 1971, shop rent disputes in Mumbai rose by 18% due to increased stress among tenants," said though, took a hit. From 2.02 million in 1970, foreign tourist arrivals dropped to 1.96 million in 1971. In Delhi, hotel occupancy dropped under 45%, said 1999 Kargil war, which lasted three months, resulted in considerable short-term market panic. "In 1999, the country's real estate market was already reeling under the impact of the Asian financial crisis. This time, housing rental values did take a direct hit—in Delhi and Mumbai's prime residential locations, rental values plummeted by 3-8% in three months and bottomed out by the year-end," said Thakur. Luxury apartments in Cuffe Parade, though, still commanded handsome prices of Rs 20,000-23,200 per sqft, he said. "Kargil war coincided with the finishing touches being made to the country's pioneering malls—Mumbai's Crossroads and Delhi's Ansal Plaza. Premium retail real estate, a shiny novelty in 1999, commanded higher rents than commercial real estate, but the conflict prompted most enlisted retailers to put their store openings on hold," said the the current conflict broadens, residential absorption in Delhi-NCR and other parts of north India may see a short-term dip of 5-10%. Luxury housing buyers tend to delay purchases in periods of uncertainty. Demand for mid-income housing will be the first to recover. Prices of cement and steel would remain elevated over the medium term unless govt intervenes."In the commercial real estate sector, if the conflict persists or widens, we can reasonably expect MNCs to put their entry/expansion plans into India on hold. This would obviously impact absorption numbers, but long-term demand, most notably from GCC, BFSI and IT sectors, will return and strengthen in 12 months," said said past conflicts have shown that while they can temporarily slow down sentiment and freeze decisions, they cannot break India's real estate market. "In 1971, Mumbai was deploying the satellite city Navi Mumbai even as the war raged on. In 1999, the demand for luxury homes continued unabated, the first malls threw open their doors, and revenge tourism plans were being charted even before the war ended." Get the latest lifestyle updates on Times of India, along with Mother's Day wishes , messages , and quotes !