Prices have sky-rocketed in recent years but with all records broken in the past few months they are showing no signs of slowing. Whilst there has been a marked slowdown in the residential market is some areas the demand for the underlying land continues to be strong.

implications of this are clear:

1. Developers will have to market properties at record prices in the coming months and years in order to recoup their land investments.
   
2. Whilst this may be hard to achieve it will ensure that most of the new supply of the property will inevitably end up catering for the top-end of the market.
   
3. Land cannot be purchased with debt therefore these recent deals are all cash only. If there is debt it is at a parent company level and will be treated as equity with respect to the specific projects.
   
4. If sales are hard to achieve developers will not be dropping prices below profitability, instead they will slow construction and hold onto the lands until the market recovers.
   
5. By the time the sales market becomes more robust again developers "new supply" will still take up to 3 years to come on stream. This is the period of the market cycle when exisiting properties rise the fastest.

Interestingly the total deal flow is mostly made up of a few huge deals predominently in Mumbai or Delhi and their respective suburbs such as Noida/Gurgaon. Delhi-based developer BPTP's Rs 5,000- crore ($1.25bn) land deal in Noida was the largest deal in the January-March period, while the Mumbai Metropolitan Region Development Authority's land auctions in Bandra Kurla Complex had fetched around Rs 4,000 crore ($1bn).

By far the biggest deal in the immediate pipeline is Indian Railways' sale of 50 acres worth Rs 10,000 crore ($2.5bn) that is scheduled to be auctioned fairly soon.

In Mumbai, a Rs 250-crore deal by Hindustan Composites is in the final stage, in which developers such as DLF, Kalpataru and K Raheja Corp are the lead bidders. The JP Morgan report comes at a time when it is expected that a tightening in global liquidity and a slowdown in the economy, could put the brakes on the real estate sector which witnessed a sharp rising growth in the past two years.

As a reflection of this slowdown, developers' plans including malls, complexes and residential projects are all being kept under wraps. Property prices and rentals have been falling which was also seen in the loss of investor interest and an erosion in the market capitalization of large listed players such as DLF and Unitech. The slowdown is also aided by the fall in stock markets as there is now a lack of capital among investors to invest in real estate projects.

Industry officials said that given the limited avenues of fund raising, a number of developers raised funds through instruments such as primary equity offerings and through foreign currency convertible bonds.

All leading developers have also scaled up their development plans as well as made fresh land reserve acquisitions. "The fundamentals of Indian real estate are very strong. More and more global funds are entering India," said real estate consultancy Jones Lang LaSalle Meghraj chairman and country head Anuj Puri.