Tuesday, August 30, 2011

Prices of residential properties in Mumbai & Delhi may take a dip! - Money Matters

Prices of residential properties in Mumbai & Delhi may take a dip! - Money Matters:

'So like me, if you’re eyeing for new properties for your perfect new home, this may just be your reason to rejoice today. The cost of your dream home just got a tad bit lesser as prices of new residential property could decline by almost 10-15% this Diwali.

Builders are under pressure from banks and investors must sell in order to generate revenues. The growing heap of debt is adding to the pressure even further (over Rs. 38, 000 crore for the top 11 realtors, reports say). “The property market cannot sustain the current price levels. Mumbai & Delhi are the most investor-driven markets. This is where the first crack can come from” says VK Sharma, chief executive officer of LIC Housing Finance, the state-owned insurer that controls a big portion of India’s home finance-market. So, as a solution, a 10 to 15% price correction is likely to occur this festive season as a means to revive sales, he informed.

But major builders are of the opinion that in order for prices to come down, the supply also must increase. “The RBI’s rate tightening has resulted in developers not having funds to complete projects, and hence the supply will remain in check while demand is still intact”

“For any easing of prices, the secret is to increase supply, not decrease it” says Niranjan Hiranandani, managing director of Hiranandani Constructions. “Developers will hold on to their stocks, unless someone is over-leveraged” he added.

Still, a common opinion is building among several market participants that the crucial Mumbai & Delhi-NCR markets will correct soon. “A price correction in Mumbai & Gurgaon is bound to happen…. There will be a fractional break of 15% in the Mumbai market” says V Hari Krishna, director at Kotak Realty Fund, a private equity arm of Kotak Bank.

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