The National Housing Bank or NHB has perhaps been the first institution to raise the red flag and spoken of a broadbased slowdown in the real estate market. NHB in its quarterly report, called the Residex, has said home prices have fallen in 22 of the 26 cities it tracks.
RV Verma, chairman and managing director, NHB in an interview to Prime Property gave his views on the likelihood of a correction in property prices.
Below is the edited transcript of the interview to CNBC-TV18.
Q: What is the chance of a price correction in realty?
A: There could not be a correction in the range of 5 percent, but it is likely that 2-3 percent further correction may happen intuitively. I feel it is possible seeing the trend in the past. Secondly, it is important to see the growth in the demand side. We are not saying that the sluggishness in the prices is on account of reduction in the demand. There has been good growth in the retail segment of housing loans, which has been sustained.
Q: NHB is convinced the broadbased slowdown is not on account of speculators and investors exiting the property market. So how exactly did NHB arrive at that conclusion?
A: Investors are mostly in the metros or in the NCR region largely and they speculate mostly not in very risky markets. Today, the market is volatile overall, the economy is volatile and it is a difficult situation overall. So we would think that in this kind of a situation, the speculators normally withdraw.
Q: I can’t believe that there are no speculators in smaller towns. I want to understand if it was the end users that were delaying their property purchases.
A: Tier-II and tier-III cities and smaller state capitals have largely loan ticket size in the range of about Rs 20-25 lakh, maximum Rs 25-30 lakh. So, that is the range of actual-end users. We see the growth in the retail housing loan market where the banks and housing finance companies for the banks who are comprising about 70 percent of the market share, their average loan size is in the range of about Rs 13-14 lakhs. So, largely the retail housing loan market has been catering to the end users, which could go up to about Rs 25-30 lakhs.