Fall in Property Price- Rate Effect.

Loan rates have however, not become cheaper but the price of a house may surely become cheaper. Due to shortage of buyers, builders are now thinking for correction in prices. RBI has given them a strong jerk by not reducing them loan rate interest. The builders had hoped that RBI would make the home loans cheaper this time in monetary policy. But it did not happen so. Builders are now facing problem in selling their houses. Mr. M.S. Aggrawal, founder, of MCX, says that real estate demand is decreasing. Buyers are decreasing due to high rates of loan interest. At present there is no possibility of reduction in interest rates. As such correction cannot be ruled out.

Correction- How much.

As per the report of ASSOCHAM, during a period of six months the demand has fallen by 20 to 30 %. People are afraid of talking loan due to increasing EMI. This is the reason that up to 25% fall has been recorded in the numbers of bank home loan takers. OSB Group president Mr. P.K. Sanyal says that great difficulties are being faced in selling big projects. Out of the total buyers are loan takers. They are expecting 10 to 20% reduction in price, only then they will be able to match their EMI.

Secret of problem

In fact, the biggest reason of problem is increasing investment of foreign fund in real estate. As per the specified rule 100% foreign investment is permissible in construction work. Foreign companies cannot buy land. They have to enter into an agreement with Indian companies. As per an estimate, foreign companies are ready to invest around us $20 billon in real estate. Before investing, they are demanding the business track record of Indian companies. How many projects were constructed and sold by them. How ever, it in necessary for starting new projects that sale of old projects is over.

Shortage of Alternatives

Peal Infrastructure General Manager( Marketing) Mr. K. P. Singh says that seeing the delicacy of time, it is good to work. If demand of price correction comes up at this stage then question does not arise to disregard same. Real estate market specialists say that at present RBI is not in a mood to reduce the rates of interest. Numbers of cash buyers of flat and house are very low. If the builder does not bring their profit margin now then later their profit may decline further. Ex Advisor of Parsnath Developer B.P Dhaka agrees builders are to move ahead then they cannot keep on hold projects for a longer period.

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by: business Total views: 15 Word Count: 439 Date: Wed, 6 Feb 2008 Time: 3:54 PM 0 comments