The economic slowdown, increase in interest rates, rising debt burden and piling up of unsold buildings is putting pressure on real estate projects in the National Capital Region (NCR) and experts say prices may tumble by up to 20 per cent in coming months.
According to PropEquity, a real estate intelligence company, absorption of realty projects has gone down by about 60 per cent in NCR in the first quarter compared to the same quarter last year.
“There will be strong pressure on many micro-markets and we expect the inventory to increase, and absorption could continue to slow down,” Samir Jasuja, founder and chief executive officer (CEO), PropEquity, said. “If absorption continues to drop, there could be ‘stage 1’ price correction in the range of five per cent to 20 per cent especially in micro-markets of Gurgaon, Mumbai and Hyderabad,” Jasuja added.
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Experts say that the steep increase in the prices of NCR property and the huge debt burden of real estate developers may also put pressure on companies to slash prices. New Delhi has seen the highest price rise compared with other metros to the tune of 48 per cent in the last two years. In comparison, other markets such as Chennai and Mumbai have seen increase of 22 per cent and 26 per cent respectively.
If the figure from PropEquity is to be believed, unsold properties on the books of the top-ten listed realty players have gone up by 13 per cent at Rs 41,455 crore so far this year.
However, despite the slowdown in sales, developers are refusing to reduce prices. “Developers cannot hold on prices for ever. We do not see immediate relief in terms of the interest rate cut in the coming months. So, some softening is apparent. Even if we are not seeing heavy cash discounts, we may see some offers coming in the form of freebies,” a senior consultant from Investor Clinic told Mail Today.
According to Anuj Puri, chairman, Jones Lang LaSalle India, “One of the reason why developers are holding on to prices is because the demand is more than supply. However, some softening is visible in high-end projects.”
Even if there is no substantial price correction, there will not be any price appreciation either, he added.