INDIA: Property prices may fall by 20%
Wednesday, July 19th, 2006 
Posted by Overseas Property Mall in The voice in favour of property prices coming down across the country is growing. Prices could fall as much as 20% feel experts. While industry players say with the interest rates still working favorably for the end user and speculative interest in real estate slowing down, actual users may soon start calling the shots in the property market.
Is a correction in the property market around the corner? Deepak Parekh, Chairman, HDFC for one expects property prices to fall by upto 20% in the next 6 months.
He told CNBC TV 18, “Prices have peaked and now prices logically have to come down and interest rates will go up marginally.” The rising interest rates on home loans have been another cause for worry. While industry players confirm demand for loans from high net worth individuals has seen a decline, they feel taking a home loan will still benefit an end user. On the other hand it will put a much-needed spanner in loan backed speculative buying of property
Rajiv Sabharwal, Head - Retail Assets Group, ICICI says, “If you look at people who are buying homes and getting tax benefits, even with an interest rate of 9% to 9.5% their post tax benefit cost would be 6% to 6.5%. Compare that with the rental he will have to pay and here you have not factored in the capital appreciation, which may come to him even at the rate of 10% to 15% per annum. It still goes in the favor of customers buying an own home rather than renting.”
While the demand for property still remains buoyant the volume of property transactions have taken a beating in the past two months due to prices spiraling beyond reach. Now consultants believe that builders will be driven to read just the steep prices they were quoting a year to six months back.
Source: MoneyControl India
Related Links:
- Colliers India Property Market Overview (pdf)
- Why real estate prices are so high (article - rediff India)
- India real estate: boom or bubble? (article CNN)
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This entry was posted on Wednesday, July 19th, 2006 at 9:45 am and is filed under Indian Property. You can follow any responses to this entry through the RSS 2.0 feed.
3 Responses to “INDIA: Property prices may fall by 20%”
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Raju Says:
October 14th, 2007 at 2:04 pmThe property market in Mumbai has declined by at least 20% between January 2007 and October 2007. A 2 BHK flat in a new building in Malad which had risen from 12 Lakh four years ago to 40 Lakhs and beyond is available this year for a little under 30 Lakh as many desperate investors want to get out and invest elsewere. Investors have stopped investing in flats which has caused delay in projects . Big builders are causing artificial delays hoping that the prices will start moving up, but this will not happen. The truth is investors are not buying, after the fall in the dollar, since rentals are not moving up. Rentals are a good indicator of demand. Many 2BHK/3BHK flats are availble for rent at only Rs.12,000/-, which is the same rent 2 years ago. Same rentals for 2 and 3 BHK also mean, there is less demand for 3 BHK. Flats in Thakur village Kandivali are now available for Rs.7000 to Rs.9000 per month.
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Chand Says:
October 14th, 2007 at 2:15 pmYou are right, I almost bought a 2 BHK in Malad for 45 lac, but could not complete the deal since my loan did not come through. The builder and broker told me the flat is not available, however another broker approached me and offered the same flat for 45.5 Lac, after 2 months this broker who was sent by the earlier broker are both offering me the same flat for 40 lac. They say an investor bought the flat and is not able to pay the installments. My friends have faced similar situation with builders in Mumbai suburbs. This seems to be ploy by builders to get more money, but the prices are going down and that is the truth.
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Vaneet Gupta Says:
October 24th, 2007 at 8:42 amThis is still the case in Mumbai, however coming to northern part of India in Delhi, the prices are still holding up. The price of a new flat is not gone up in relative terms, though cost of construction has and hence a minimal rise. These prices have not gone down either, because of steady influx of industries in and around Delhi, high employment rate and high consumer spending. For last 1 1/2 year, prices in Gurgaon has preety much stagnated or rather 100-300 Rs psqf less for properties on sale since last 2 years. This might change by February/March 2008 leading to a rise in psqft prices of atleast 20% looking at the trend. The maximum impact will be for properties in the range of 1800-2400Rspsqft in areas of Gurgaon,Manesar,Noida,GreaterNoida.
