Opinion is divided on how much, and how soon, property rates in Mumbai will fall, but there is near unanimity that prices will weaken over the next three months.
MUMBAI: With the stock market bull in retreat, can its real estate cousin be far behind? Opinion is divided on how much, and how soon, property rates in Mumbai will fall, but there is near unanimity that prices will weaken over the next three months.
“A lot of flats will come up for sale at a much lower price than the current market price. Stock market investors who had bought properties from gains made on the market might want to sell them at any cost today. By March we can expect a 20-30% correction in some pockets. The rates will start going down by 10% or so now itself,” says Yashwant Dalal, president of the Estate Agents Association of India.
Sunil Bajaj, a property dealer, says the fall could be restricted to the speculator segment. “The property market will lose the speculator’s money owing to the crash in the stock market.
“If prices go down, it will be because speculators may want to sell at any cost to recover money lost in stocks,” says Bajaj.
The more immediate effect of the stock market crash is that property deals might fall through at the last minute. A Thane-based real estate broker says he was on the point of clinching a flat sale deal at Hiranandani Estate when the Reliance Power listing brought down the stock market on Monday. The buyer vanished.
“A 10% correction can be expected in property rates as a result of the stock market fall. I am expecting deals to go down by at least 50% if the stock market keeps going down,” says Kemraj Rastogi, a property dealer from south Mumbai.
Chetan Narain, CEO of Narains Corp, property consultants and realtors, feels that a correction is overdue due to the unrealistic levels to which prices had risen.
“The madness and frenzy of spiralling prices will have to take a breather. Sellers and developers will have to look at correcting their over-inflated prices. Movements in the stock market have a sizeable impact, and they cannot be ignored,” says Narain.
If prices weaken, where will they weaken first? “In peripheral areas beyond Kharghar and Bhayander, where the rates had skyrocketed, there will be some stagnation and even some correction,” says Sanjay Dutt, executive director at Cushman & Wakefield real estate consultancy.
Not everybody is bearish, though. Anuj Puri, chairman and country head of Jones Lang LaSalle Meghraj, says the stock market correction will have only a marginal and indirect impact on the real estate market. It will affect smaller investors with exposures to both stocks and real estate.
“Actual property buyers will not be affected, unless the stock markets keep fluctuating for a prolonged period. If they do, there will be a slowdown on home buying. Investors and speculators investing on a large scale will bear the brunt tangibly,” says Puri.
Pranay Vakil, chairman of Knight Frank consultancy, also outlines the difference between a stock market crash and a real estate one. “You don’t buy property like you buy stocks. There will be an effect, but it will take time to show. As of now there will be a psychological effect. Sentiments will be affected but the real effect will show only after a month or so,” says Vakil.
Narain sums up the issue thus. A “correction”, he says, is required irrespective of what happens in the stock market. Pointing out that sales have already slowed down, he says greedy sellers have hiked their demands too high and buyers have given up in frustration. “I think it is about time sellers took a relook at pricing,” says Narain.
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