Ground reality: Equity fall to temper real estate prices

The correction in the market is likely to affect realty prices across the country, especially in residential and land markets of Mumbai and Bangalore, according to industry analysts.

Land prices in these markets are also likely to see a downward correction. This, combined with rising interest rates, could actually push the market to a situation where transactions over the next three to six months will dwindle, say analysts.

According to Arun Goel, CEO of the DHFL real estate venture capital fund, these markets have been due for a correction for quite some time now, and this could very well be the trigger.

“There was a lot of speculation in real estate, given the excessive liquidity in the market over the last two years and this had pushed prices to unreasonable levels in suburban Mumbai and Bangalore. Gurgaon and Noida had also seen such surges but they have already seen a downward corrections. The stock market correction could very well result in real estate prices coming down by 15-20 per cent in these markets over the next three to six months. Land deals could see a correction of 20 per cent,” he said.

In the past one year, residential prices in suburban Mumbai and Bangalore had risen sharply, in some cases by as much as 30 -40 per cent. In Mumbai, areas such as Bandra, a western suburb, has seen prices touch the Rs 1 crore mark for a residential flat which was fetching Rs 65-70 lakh in just a year ago.

Said another market analyst, “Although the investors in real estate are a different class from those who invest in equity markets, we could see a situation where the number of transactions in the market go down over three to six months as liquidity in general will be hit hard.

Courtesy: http://www.business-standard.com