Real Estate News - Residential Property Prices May Fall by 35%

Realty brokers expect India property prices (residential properties) to settle down at a 25-35% discount on the current listed prices over the next couple of months i.e. by June 2009, according to a recent survey.

The demand for homes remained muted in the otherwise busy season of January-March, the findings of the nationwide property brokers’ poll, conducted by financial services company Edelweiss, indicate. The only projects selling are those priced at least 25-30% lower as against the ongoing market rates, while real estate companies reluctant to slash prices are struggling to clear inventory.

“Customers are coming back for deals. Prices have begun to consolidate at 30-35% discount to the list prices,” realty company Orbit Corp’s corporate strategy head Ram Yadav says.

Some aggressively priced new projects, including Lodha’s project in Thane, HDIL’s in Andheri and Nirman Lifestyle’s Mulund project, are doing well in Mumbai. “HDIL’s Rs 7,651/sq ft at Andheri is a good price as compared to Rs 6,000/sq ft at which the state housing development authority MHADA is selling its flats in a similar area,” says Santosh Naik, MD and CEO of Disha Direct, a real estate marketing company.

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Property dealers, the report says, don’t see a recovery in the domestic realty market any time soon as buyer sentiment is expected to remain subdued due to the weak economic environment.

According to the survey, 76% of the brokers expect prices to decline over the next three months and about 53% of them see the trend continuing over the next one year.

City wise, Bangalore is the least pessimistic with 32% of the brokers surveyed having a negative price outlook over the next one year, while Chennai is the most bearish with 73% expecting a decline in realty value.

Sales during the January-March quarter are expected to be much lower (less than 50%) than what they were in the corresponding quarter last fiscal.

India’s largest real estate companies DLF and Unitech are faced with unsold inventory and increasing interest costs. Things do not seem to be getting better for at least another year for either of these developers.

Considering all these factors, buying stocks of realty developers is not advisable for time being. Property rates are falling and are going to fall more in future due to slump in real estate demand, sales has already fallen, financial numbers for these developers are not going to be as they use to be in past, atleast in near future. If anyone would like to invest for long term duration, one may consider to buy stocks of big developers like DLF, but only at deeps in current stock market.
Source: EconomicTimes