A fast-growing economy fired up the real estate market after almost a year-and-a-half of property gloom, with prices touching the pre-crisis peak and companies announcing structures that will pierce the sky. The property party would have been perfect had it not been for the service tax slapped on under-construction buildings and as expected, the burden was passed on to the buyer. The Budget proposal meant that 25 per cent of the gross sale value of the property would be taxed and this resulted in a 2.5 per cent increase in the rates of houses under construction.

Prices, on an average, increased by 30 per cent across India, forcing the Reserve Bank of India to tighten the norms on lenders’ exposure to the realty sector. The year also saw some of the developers getting embroiled in one controversy or another — like Unitech in the 2G spectrum allocation scam, Emaar MGF in the CWG and Lavasa in the green norms violation case — which made 2010 a not-so rosy year for them. The robust economic growth, coupled with increased focus by developers on building affordable homes, helped the realty sector recover from the slowdown in demand, which was hit by the global economic recession of 2008.

“In 2010, the office and retail segments started with nervousness, but are ending it on a good note. However, the residential sector started nicely, but is also ending it nervously,” JLL India Chairman and Country Head Anuj Puri said. “In Delhi and Mumbai, housing prices had fallen by about 25-30 per cent after the global meltdown in 2008. The prices have again shot up and reached the 2008 peak level,” Puri said, adding that the rise in other cities was 10-15 per cent. The rentals for office and retail spaces, however, remained stable despite increase in volumes. This was due to excess supply vis-a-vis demand.

With demand and prices improving compared with last year, over a dozen realty firms approached market regulator SEBI to raise money through initial public offer (IPO), but bad market sentiments forced them to hold back their IPO plans even though they had the necessary approvals. A clutch of realty firms, including Emmar MGF , Lodha Developers, Sahara Prime City , Oberoi Realty , Ambience, BPTP, DB Realty, Raheja Universal and Nitesh Estates , filed papers with SEBI to raise funds through IPO.

But apart from Oberoi Realty, DB Realty and Prestige Estates, none of them has so far come out with an IPO. The appetite for realty stocks was low, as the market sentiment got affected because of allegations faced by some of the developers.