The last time Bharat Sharma went looking for a house that fit his
budget of Rs 40 lakh was in January 2011. Prices were high then and so
were interest rates.
The same month, he came across reports about a possible correction in property prices in the next one year.
The arguments were compelling. Property prices and interest rates were high, making EMIs unaffordable. Income growth had slowed down, job creation was on the wane, inflation was high and there was oversupply in the market.
With everything pointing to property prices coming down, Sharma decided to wait. He is now back in the market looking for a property, with a slightly higher budget (Rs 42 lakh).
But contrary to his expectations, prices have not gone down. In fact, they have risen. "The project that I was considering is now sold out and the others launched recently in the same locality are quoting at higher prices," he says. Why did property prices defy what the market pundits were expecting? What prevented them from falling?
Continuing investor interest
Investors are the lifeline of a cash-strapped developer. They are the ones who are keeping builders afloat even now.
Pankaj Kapoor, managing director of real estate research firm Liases Foras, explains that compared to 1995, when there was shortage of liquidity in the market which led to a crash in the real estate sector, the situation now is quite different. "There are hardly any avenues which offer you safe returns today.
The stock markets are volatile and gold prices are also at an all-time high. So, investors look at the real estate sector to park their excess funds. It is not the developers who would have to take a price cut but the investors," he adds. According to Kapoor, it is the investors who are instrumental in the property prices staying firm.
"Besides this, there are a lot of venture capital firms which have bought huge stakes in realty projects. For the developers, it is a win-win situation. Since they have already cut down on their losses, they won't be losing much even if the rates come down a bit," he adds.
The same month, he came across reports about a possible correction in property prices in the next one year.
The arguments were compelling. Property prices and interest rates were high, making EMIs unaffordable. Income growth had slowed down, job creation was on the wane, inflation was high and there was oversupply in the market.
With everything pointing to property prices coming down, Sharma decided to wait. He is now back in the market looking for a property, with a slightly higher budget (Rs 42 lakh).
But contrary to his expectations, prices have not gone down. In fact, they have risen. "The project that I was considering is now sold out and the others launched recently in the same locality are quoting at higher prices," he says. Why did property prices defy what the market pundits were expecting? What prevented them from falling?
Continuing investor interest
Investors are the lifeline of a cash-strapped developer. They are the ones who are keeping builders afloat even now.
Pankaj Kapoor, managing director of real estate research firm Liases Foras, explains that compared to 1995, when there was shortage of liquidity in the market which led to a crash in the real estate sector, the situation now is quite different. "There are hardly any avenues which offer you safe returns today.
The stock markets are volatile and gold prices are also at an all-time high. So, investors look at the real estate sector to park their excess funds. It is not the developers who would have to take a price cut but the investors," he adds. According to Kapoor, it is the investors who are instrumental in the property prices staying firm.
"Besides this, there are a lot of venture capital firms which have bought huge stakes in realty projects. For the developers, it is a win-win situation. Since they have already cut down on their losses, they won't be losing much even if the rates come down a bit," he adds.
 |
However, in some cases it is also because of these investors that the builders cannot reduce prices substantially. "A big investor who puts in money at the pre-launch stage of the project is also looking to exit at a higher rate later," says a Gurgaon-based real estate broker. "If the developer reduces the ticket price, the investor will not be able to sell his properties in the market and, therefore, will not invest in the builder's projects in future," he says.
2 comments:
I am without a doubt thankful to you for providing us with this invaluable stuff. My spouse and I are ultimately grateful, quite frankly the advice we needed.
covenanthomemanagement.com
Very interesting subject i read all blog it impressive good written. appreciate it for putting up. Thanks for taking the time to discuss this subject.
Post a Comment