Deepak Parekh, chairman of HDFC, expects real estate prices across the country to come down from current levels over the next three to six months.
MUMBAI: With the stock market in a state of flux, real estate prices are likely to take a hit next.
Deepak Parekh, chairman of Housing Development Finance Corporation, expects real estate prices across the country to come down by 20 per cent from current levels over the next three to six months.
But this expected fall has nothing to do with the rising interest on home loans. “Investors are moving out of the market because they see the real estate fully priced,” Parekh said, though demand from genuine buyers remains.
He added that when prices were hardening, a lot of investors bought properties under construction and sold them on completion, booking up to cent per cent profits. Now, with higher interest costs and a meltdown in equity markets, these players are deserting the realty market, bringing a fall in demand and a drop in prices.
But Parekh ruled out an increase in HDFC’s interest rates in the immediate term.
Other industry experts agree with Parekh in principle, but differ on the details. “If the Sensex falls, there is a chance of correction as Mr Parekh says. But if the Sensex continues at the current level, then the market mood will continue,” said Joy Sanyal of Trammel Crow Meghraj, a global real estate consulting firm. Sanyal said that even if there is a correction, it will be in the range of 8-10 per cent, not more.
Real estate consultant Ashok Narang does not foresee any fall in prices at all, except in places where they are exorbitantly high. “Raw material and land scarcity are the main reasons for increasing costs in addition to the huge demand from developers in Bombay and across the country,” he said.
A consultant who did not want to be named questioned the logic of Parekh’s prediction of a decrease in prices, as his company has been financing several high-priced land purchases. “HDFC has funded a number of developers who have bought mill lands at huge prices. They have even estimated the price of Mukesh Mills at about Rs800 crore, which is about Rs14,000 per square foot.”
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