Prabhakar Sinha, February 4, 2007
The Economic Times


Are sky-high prices and dearer EMIs putting off home buyers? As realty rates climb down a notch, Sunday Times seeks answers to the question: Is the market going through the long-predicted correction?

The market is hoping that the correction wouldn’t go beyond 10-15 percent from present levels as long as economic growth continues to create new buyers

What goes up must come down....The great property spiral may finally have to kowtow to the laws of nature. For real-estate prices are in for a correction — at least in North India. While the decline is relatively sharp (10-20 percent) in ‘B’ cities like Chandigarh, Amritsar, Jaipur, Rudrapur and Karnal, it’s moderate (5-10 percent) in the National Capital Region (NCR) of Delhi. And prices in other cities like Mumbai, Bangalore, Pune and Chennai are showing signs of stabilising.

It’s happening in Delhi too. Barring posh South Delhi, where residential prices are still rising, there’s been a 5-10 percent fall in the months since Diwali in suburbs like Noida, Greater Noida and Gurgaon, and in areas like Mayur Vihar, Patparganj, Rohini and Dwarka.

The main reasons are fairly obvious: an unprecedented price boom, which has made property unaffordable for a large chunk of the middle class; a flood of new projects, and the complete mismatch between capital value and rental rates. However, developers and consultants take heart from the high economic growth; the decline, they say, is unlikely to be steep or last very long.

‘‘The correction was inevitable given that prices had become unrealistically high. In that sense, it’s good for the sector,’’ says CB Richard Ellis (South Asia) MD Anshuman Magazine. But, he adds, it should not be seen as the beginning of a slowdown as latent demand is still ‘‘very strong’’.
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