Property prices may fall by 20%

The voice in favour of property prices coming down across the country is growing. Prices could fall as much as 20% feel experts. While industry players say with the interest rates still working favorably for the end user and speculative interest in real estate slowing down, actual users may soon start calling the shots in the property market. 

 

Is a correction in the property market around the corner? Deepak Parekh, Chairman, HDFC for one expects property prices to fall by upto 20% in the next 6 months.

 

He told CNBC TV 18, "Prices have peaked and now prices logically have to come down and interest rates will go up marginally." The rising interest rates on home loans have been another cause for worry. While industry players confirm demand for loans from high net worth individuals has seen a decline, they feel taking a home loan will still benefit an end user. On the other hand it will put a much-needed spanner in loan backed speculative buying of property

 

Rajiv Sabharwal, Head - Retail Assets Group, ICICI says, "If you look at people who are buying homes and getting tax benefits, even with an interest rate of 9% to 9.5% their post tax benefit cost would be 6% to 6.5%. Compare that with the rental he will have to pay and here you have not factored in the capital appreciation, which may come to him even at the rate of 10% to 15% per annum. It still goes in the favor of customers buying an own home rather than renting."

 

While the demand for property still remains buoyant the volume of property transactions have taken a beating in the past two months due to prices spiraling beyond reach. Now consultants believe that builders will be driven to read just the steep prices they were quoting a year to six months back.