Will Real Estate Price Come Down?

Bangalore: With volatile economic condition and increasing property prices, real estate is gradually becoming expensive in India. Now, the question which arises is that whether the real estate prices will come down or not. The current market scenario also indicates that the property prices can come down, which highly depends on the developers holding power, reports Rajshri Dinkar Mehta of TNN.

Off late it’s been observed that home sales have declined in the city and with the increase in newly built properties, the rate of unsold inventories is also witnessing rise. Moreover, property values dropped by 32 percent year-on-year, according to a report published by the broking house Jefferies. The report also revealed that the increasing property prices and hike in interest rates are the main reasons for slowdown in home sales. According to Jefferies, the current scenario of the real estate sector will continue throughout the year.

The real estate volume has witnessed slump over the last eight months. Six out of seven metros are witnessing decline in real estate volume. For instance, Mumbai Metropolitan Region (MMR) and Delhi-NCR witnessed slump of 50 percent in the first quarter of 2012 (January-March 2012), followed by Gurgaon at 45 percent, Hyderabad at 34 percent and Pune 32 percent. Whereas, Bangalore’s real estate market witnessed 18 percent drop in sales, followed by Chennai at 11 percent and Kolkata witnessed a marginal increase of 1 percent in volume sales.

Although the country is witnessing drop in sales, yet property prices in most of the cities are rising high. Gurgaon has seen the maximum rise of 7 percent over last month and 32 percent over last year, whereas, prices in Mumbai Metropolitan Region (MMR) remained flat. The drop in volume sales has also slowed down in the section of new property launches. As, MMR saw a slump of 33 per cent in new launches, Bangalore witnessed a drop of 30 percent and Hyderabad saw a drop of 37 per cent.

Although, the cities are witnessing slump in new launches, yet volume levels are at a high of almost 18 months of average sales. Mumbai Metropolitan Region (MMR) has an inventory level of 19 months, Hyderabad of 31 months and Noida region 23 months, which are close to their peak levels.  In Delhi-NCR and MMR, price correction is already in progress in some newly launched projects. Also, developers are offering freebies in MMR region and discounts are being offered in NCR region.