Real Estate Prices In India Expected To Decline By 25%

Prices for real estate in India are expected to decline by 25 per cent in the upcoming quarter, according to market observers.

The Royal Institution of Chartered Surveyors (RICS) says that the market is currently over-heated, after a strong growth in recent years, which has since slumped due to the global economic uncertainty.

The consequent cash crunch for realtors and cautious buying habits by potential investors is expected to shrink the market and bring down prices by nearly a quarter, with sales in Delhi and Mumbai already seeing drastic cuts in sales.

Large scale developers, such as DLF and Unitech have already started selling land plots in order to keep some liquidity and pay back loans to banks. According to the Reserve Bank of India, the developers held around US$24.4bn of outstanding credit at the end of June, a 23 per cent increase from the year prior. With hiked interest rates, developers are finding it increasingly difficult to keep their heads above the water.

With home prices at an all time high, market observers say that if there won’t be a price adjustment for launched projects, new developments will be offered to a much lower price. This puts additional pressure on developers who are largely required to repay bank loans by the end of this fiscal year ending on March 31, 2012.

Sales in Mumbai have declined by 60 per cent in the last six months, with Delhi down by 50 per cent, confirming that there will likely be trouble ahead for developers if price corrections won’t be introduced.