Property prices in major Indian cities, including Mumbai and New Delhi, are set to slump by as much as 30% in the next three-six months as rising interest rates and tighter lending norms have led to a sharp drop in demand for homes reports Wall St Journal.
Prices could fall in a few months
“Softening in prices would begin in a month or two if sales continue to be low,” said Adhidev Chattopadhyay, an analyst at Mumbai-based Edelweiss Securities Ltd. A Credit Suisse note on 19 January forecast that property sales in India may decline unless prices are cut 10-30%.
Interest Rates Rising
The Reserve Bank of India (RBI) has signalled borrowing costs will rise further after increasing interest rates seven times in the past year to curb price rise. It has also tightened lending norms for the purchase of property to rein in surging prices. Even as the supply of residences outstrips demand, Indian property developers, who need to repay an estimated Rs14,000 crore to banks by the end of the financial year, are facing the spectre of loan defaults as dropping stock prices make it difficult for them to access equity markets, and banks tighten lending.
Semblence of a bubble
“A consensus is emerging that we are seeing the tip of a slowdown or a semblance of a bubble and the nervousness is evident on a pan-India level,” said Amit Goenka, national director, capital transactions, Knight Frank India
Supply is outstripping demand
Recent home sales data suggest it may take as many as 22 months for the inventory to be cleared in cities such as Mumbai, Delhi-NCR (National Capital Region), Chennai and Hyderabad, said Pankaj Kapoor, chief executive of Liases Foras.
Indian residential sales falling
Residential sales tumbled 15% in Gurgaon real estate, 20-25% in Greater Noida and Ghaziabad and almost 40% in Faridabad during the last two months of the past year, according to PropEquity Research.
View from Navyroof.com: Is it now time to sell Indian property?
This really depends on your investment horizon and what price level investors bought at. All the signs point to selling and booking any recent profits made. Real estate in India witnessed a sharp slow down in 2008 and many investors & property developers left the market fast, leaving investors with unfinished properties and unrefunded deposits.
The last two years have seen a steady rise again in property prices in India, so our view is a small correction is likely to take place as mortgage lending will slow with higher rate rises needed to curb inflationary pressure. Indian property rentals have been strong in most cities so maybe investors with longer investment strategies can sit tight for longer term, as ultimatelly urban population rates in big metros will continue to increase.
Tags: Indian Real Estate, renting property in India, sell real estate in India, selling property in India
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