Mumbai, Delhi High-End Home Prices May Fall 20%

Residential property prices are heading for a 20-25 per cent fall in the high-end category, mainly in Mumbai and Delhi-NCR region. Industry veterans and analysts predict a fresh drop, much similar to that in 2008-09, in next four to six months as home hunters are postponing their purchase decision. Analyst cite the heated up market and high interest rates as reasons.

Niranjan Hiranandani, founder and MD of Hiranandani Constructions, said the industry is bracing for a slowdown, especially in the upper-end of the property market where prices have gone through the roof. “I think there could be a 20-25 per cent fall in next few months, with the high-end of the market taking a hit,” says Hiranandani.

He, however, said there is huge demand in the mid-end and lower-end categories.

Sunil Mantri, promoter of Sunil Mantri group, said there could be some price correction of around 5-10 per cent in certain locations in Mumbai where the supply is more, such as Lower Parel, Kalyan, Dombivili and suburbs of Thane.

Mantri said his company has already started offering discounts up to five per cent depending on negotiations.

Brotin Banerjee, MD and CEO, said at least 10-15 per cent price correction is expected in the high-end segment as it is difficult for the developers to get cash for their projects.

Subhankar Mitra, local director-strategic consulting, Jones Lang LaSalle, said another 20-25 per cent price correction in the high-end segment is definitely expected in the next six months.

“In the last couple of months, sales of high-end properties have reduced to low single digit in a month which is a clear indication of slowdown,” said Mitra adding that the sales have dropped for affordable segment by 20-30 per cent.

Rates in the metros have shot up by 30-35 per cent in last one year. Sales of high-end luxury properties have slackened over last couple of months. The banks have increased rates by around 2-7 per cent during last one year. Due to alleged involvement of real estate players in 2G spectrum fraud and bribe-for loan scam, banks are cautious to lend funds to developers. Most players are facing cash crunch and are running out of options to raise fresh funds.

“Slashing prices and attracting customers is the only way for many builders. It is absolutely essential for them to keep up cash flow,” says an industry official.

“With rate hikes, the RBI is throttling the supply and not demand,” says Hiranandani. He advocates a lending system where retail home loans are kept at a minimum in order to aid home hunters to realise their dream while bank loans to builders attract higher interest rates as prescribed by the central bank.

Mantri said developers are “definitely trying to sweeten offers” by giving discounts.

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