Property price falls in 10 cities during March quarter
Residential property price drops in top cities of India
The year 2012 has witnessed a drop in property prices in the March quarter and the home buyers have paid very less while investing in new projects. The property prices have declined as the real estate agents and developers have lost the hold of increasing the property prices. The house prices in 10-15 cities have stooped down when compared to the previous years.
Residential property price decline in top cities
The cities with a decline in their residential property prices are Kochi and Bangalore which are by about 12% and 8% in the March quarter. The developers are burdened with oversupply and are trying to clear their stock. On a yearly basis the prices in Kochi had fallen by about 16% and had risen in Bangalore instead, by about 4.5% due to an increased demand.
Further, it is also anticipated that in most cities, real estate developers will lose their hold on increased property prices in the coming years. The developers are apparently loosening down their property prices and are also ready to negotiate with the buyers. This further is leading to a correction in prices.
In Mumbai, the pressure on residential realty demand endures and has seemingly affected the prices slightly. The prices in Mumbai on a yearly basis witnessed a change of 8.6% and on a quarterly basis a correction of about 1.6%.
With the fall of the residential property prices, many renowned real estate developers like Oberoi Realty, Sobha Developers, Godrej Properties and Unitech have seen an increased surge in their sales. Although none of the real estate companies have declared about the price negotiation, it is reported that they are privately negotiating the prices with the buyers which has apparently helped many companies increase their sales.
The square feet area sold by Godrej in the previous quarter is 7.7 lakh against 5.2 lakh square feet. Similarly, out of 1.2 lakh square feet, the Oberoi Realty sold about 1.8 lakh square feet and Sobha developers sold about 8.6 lakh square feet and Unitech sold about 18 lakh square feet.
Residential property price increase in Delhi and Jaipur in March quarter:
On the other hand the residential property prices in Delhi have reached its heights with a whopping increase of 33% on a year-on-year basis. Also Jaipur has witnessed a drastic increase in its property prices of about 25% in the March quarter. The reason for the increased property demand in Jaipur is the growing incomes and the growth in infrastructural developments.
What happens when real estate prices fall?
There are various effects which are caused due to the fall in real estate prices;
Firstly, the fall in residential properties will result in the reduction of the wealth of homeowners. It also reduces the consumer confidence which further leads to the lower levels of spending, borrowing and investing which gradually slows down the economy.- One of the reasons for a boost in the consumer spending in India is the technique of investment property resale. The falling residential prices halt the return on investment cash by reducing the consumer expenditure.
- Thirdly, the media makes propaganda out of a price fall in residential property and does large press coverage. Once when the media makes the property price fall a big issue, naturally there will be a fall in property values and people will continuously buy properties for a lower price.
- Also a fall in the property price will reduce the consumer sentiments and their contribution towards the economy. This will slow down the economy.
- It will lead the economy into the recession stage, with a downfall in money prices.
Apart from all the disadvantages from the fall in property price, one advantage of it is that it encourages the first time home buyers and increases the property sale.
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