Is real estate in India moving towards slow destruction?

Q: As per property websites data, a deep slowdown have seen in large cities like Mumbai, Pune, Bengaluru, Chennai, Hyderabad, Kolkata and Delhi/NCR. What do you think Guy's? give your opinion....

Abhishke Karule, Mumbai

20th July 2015

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Replies (3)

Hey Guys,
I wanted to know the reason of slide realty market. According to you which are the factors that effects a lot?

Vaibhav Bhatnagar, Bangalore

20th July 2015

Comment

According to me both supply and demand side factors effect the realty markets. If i talk about supply side then RBI's Banking policy seems to have hold property developers either stop construction or cut prices. Secondly, NDA Govt. has cut subsidies sharply and is shifting subsidies to Direct Benefit Transfer. As a result real estate construction has been checked.

And if we see the demand side, then we will find that Black Money Bill which went live on 1st July'2015 and has made HNW families unwilling to invest in Real Estate.

Pallav Singh, Faridabad

20th July 2015

Right Govinda,
And those who take it that buyers are ready to live with only 5% rental yields as they might have a very bullish view of capital gains turning up from real estate in India. And we are seeing real estate pull-back these days with prices correcting in most tier-1 and tier-2 cities along with sharp drops in transaction and new launch volumes.

Vasanth,

20th July 2015

Comment

Hi Vasanth,
I think that the major drivers for this slowdown are a mix of supply and demand side factors. The result is not just a drop in demand for building materials and create challenges for lenders with big mortgage but also a generalized slow down in GDP growth. It is the only sector which drives 50% of India's capital expenditure and 30% of its jobs break down.

Devesh Kumar, Ahmedabad

20th July 2015

Data from property websites suggests a deeper slowdown in India's large cities, with prices falling by 7-18% Y-o-Y while the RBI's Housing Price Index suggests that prices have average on a pan-India basis. At the same time transaction volumes have fallen by 10-15% per annum in Maharashtra and Tamil Nadu for 3 consecutive years. And new launch volumes are down 40-80% on a PAN India level.

Vasanth,

20th July 2015

Yes Abhishek,
As per the research report, the real estate market across India is witnessing sharp drop in transactions and new launch volumes in difference with the Reserve Bank of India, Housing Price Index as banks started pulling back their lending to developers and fear of Black Money Bill appearing large among speculators.

Vasanth,

20th July 2015

Comment

@Vasanth, From above points, rental yields in property markets in India have remained very low as compared to its other Asian opponent. Mumbai has a rental yield of close to 2% while the lending rate hang around 10%. The difference between lending rates and rental yields is one of the highest in India.

Govinda,

20th July 2015