With the global economic recession, and the resistance of the Indian economy to withstand the global pressure, The realty sector of our country faced a short slowdown in 2008-09. But with the increase in the consumers’ confidence and lower interest rates which the banks provided at that time, the demand for properties began to surge.
With the applied economics policy, the increased demand of loan due to lower interest rates granted the developers a right to increase the property values by over 20-35% which was applied in almost all the corners of our country. But seems like with the current move to increase the interest rates on a home loan, will compress the prices of homes in the realty sector.
“The sharp rise in prices in such a short span of time is a growing concern and may slow down sales of residential properties in the next few months,” said GB Singh, chairman and managing director of Red Fort Capital, a real estate-focused private equity firm. Mumbai, Chennai and other metro cities are likely to bring down their property prices.
But some developers feel otherwise. Pradeep Jain, chairman at Parsvnath Developers , says there won’t be any correction in Delhi NCR as supply of affordable housing is limited but Mumbai will see a drop in prices. Chennai was prey to the Realtors as the prices were over 50% of their actual prices compared to 2009.
The reason of increased consumer demand for property after the slowdown was due to the entry of investors and speculators in the realty market, who in turn, were able to create an artificial demand. With this motive the, Realtors were successfully able to raise their prices by 15%, and with the help of the speculative and inflated demand, they were able to sell it at a profit to the potential customers at the end of the construction of the apartments.
With the revisit of investors in 2010, the slow economic conditions forced them to change their decisions of investing, thereby making them just 30% of the market shareholders than what was 3 years back of 70%.