Real estate begins to crumble

Slowly, but surely, the property market has begun to unravel. “Because of high mortgage rates and (tight) monetary policy, the real estate market is subdued temporarily,” says KP Singh, head of India’s most valuable property developer, DLF Ltd.

In Gurgaon, on the outskirts of New Delhi, home prices have dropped 25% to Rs60,000 a square yard in the three months to March, according to data compiled by Bloomberg. “The rise in interest rates is definitely one of the major factors deterring home buyers,’’ says Anshuman Magazine, managing director of CB Richard Ellis Group Inc., a New Delhi-based real-estate adviser.

“Growth in home loans may slow to 17-20% in 2007-08, the Associated Chambers of Commerce and Industry said in a report on Tuesday. “ #Sale of residential property dropped by over 70% in May-June,” it added.

Brijinder Ahuja, advisor, corporate strategy, Omaxe group, said he didn’t see a drop in demand. “It is a slowdown. Extra supply is another reason, beside high interest rates.” The drop in real estate has happened because “investors are selling their properties at prices lower than that of developers.”

Sarang Wadhawan, managing director of HDIL, a Mumbai-based developer, says, “There has probably been a 20% slowdown in sales, but it cannot qualify as a dip in demand.”