Call it the effect of high inflation and interest rate. Property prices in Ahmedabad have gone down in tune with national trend.
Call it the effect of high inflation and interest rate. Property prices in Ahmedabad have gone down in tune with national trend. However, the posh western part of the city has bounced back after witnessing a dip in the June quarter, while the south zone faced a major setback in September quarter after witnessing phenomenal growth in the last quarter. At the national level, of the total 15 cities, nine are in red and only Chennai, Mumbai and Pune have witnessed considerable growth.
Industry experts believe that Indian real estate industry faces challenges and liquidity crunch may slow down construction pace.
This is probably for the first time the city residex has witnessed a dip. The trend is revealed by National Housing Bank's (NHB) residex data for July to September 2011 quarter which shows that there is price correction of around 4%, taking the city index to 163 in September from 169 in last quarter.
However, posh localities have witnessed around 5% price rise in the second quarter of the year after facing 14% correction in June quarter. Moreover, the north zone showed increase of 10% in property prices, which was followed by central zone with 7% hike in rates. The south zone had shown unprecedented rise of 38% growth in June quarter, but witnessed major dip of around 25% in realty prices taking the index from 157 to 116. Similarly, east zone also suffered a dip of around 5% in realty prices.
Local industry experts believe that interest rate could be the sole reason for dip in city index and purchase of properties in western part is more viable from appreciation point of view. "The demand comes mainly from the middle class customers and increasing interest rates have taken a toll on the common man's budget," said Aashil Patel, director of Re/Max, Gujarat. He was surprised to see appreciation in western part and said that the developers, barring a few, would be forced to sell properties at lowered rates in near future.
However, the properties located in posh areas are believed to have gained confidence of buyers. "Almost all the amenities are available in the western part and there are more chances of appreciation here," said Pravin Bavadiya, managing director of City Estate Management.
At the national level, only Chennai, Mumbai and Pune have showed considerable price hike, while cities like Kokata, Hyderabad, Surat, Bhopal, Faridabad have seen a dip.
According to experts, real estate developers are reeling under high debt and FDI inflows have also slowed down. Residential sales remained slow in major cities in 2011. "Cautious buyer sentiment prevailed due to the adverse impact of the prevailing macro-economic factors such as rising interest rates and surging inflation. While rising home loan rates have exerted pressure on buyers, developers have been constrained by the rising costs of construction and debt," said Ashutosh Limaye, head, Research & Real Estate Intelligence Service, Jones Lang LaSalle India.
He said that because of the prevailing uncertainties in the global market and the likelihood of further interest rate hike by RBI in early 2012, sentiments in the residential market will remain cautious for some time.
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