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Rising rates may see realty correction


Rising rates may see realty correction

Last updated: March 7 2007
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  • Rising rates may see realty correction

    Rising interest rates and additional pressure on household budgets are surely impacting the price trends in the residential property market, which seems to be cooling down after touching record highs over the past few months.

    Small cities, especially tier-II cities, have already reported 10-15% drop in overall sales and prices over the past couple of weeks. The residential property prices are heading well beyond the reach of many households as the rapid growth in property values outpaces increase in incomes.

    Many new home-buyers are expecting a correction in the property prices that rose over 80% during the past one year, and have shelved their property purchase plans.

    The growth in deals has also come down to 10% from 20% one month back, putting even the developers in a fix. Among the factors suggesting that the market may be cooling, are a definite fall in new buyer enquiries, a slowdown in recently agreed sales and longer stay of these properties on the market before sale.

    Currently, housing prices are rising far more rapidly than personal incomes. Industry analysts point out that these are ominous trends and history shows that neither of these will go on forever. When the price of an asset accelerates beyond its underlying value, it may turn out to be a bubble. A price correction may follow.

    Almost every listed real estate company has seen a 20-50% fall in their stock prices over past one month.
  • #2


    Re : Rising rates may see realty correction

    Rising property prices in Indian Real Estate can be attributed to the very fact that there is a mismatch between demand and supply.

    Another factor could be the ease at which home loans are available. As compared to a scenario some 10 years back when procuring home loan was a difficult task and the interest rate was not too high. Now the case is very much different, you can avail home loans easily but the interest rates have certainly climbed. This may help in stabilizing property prices in some cities but not drastically.

    However, a correction is unlikely because of the current realty boom, demand from the booming Indian economy, foreign investment and rise in the income of families.


    • #3


      Re : Rising rates may see realty correction

      IS there any impact after budget????


      Have any questions or thoughts about this?