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Property rates may drop in Delhi, Mumbai in a few months

Property prices in key cities, including Mumbai and Delhi, are likely to drop in the next few months, according to analysts and real estate consultants. In fact, analysts say that there are indications in the market already: price drop in Mumbai and moderation in residential rates in the Gurgaon region.

Says Sobhit Agarwal, managing director at consultancy firm, Protiviti Consulting Ltd, “Homebuyers are typically under inflationary pressure. Plus, banks have also increased their lending rates. Wherever there is speculative buying and selling, lending becomes tougher. This is the case with metro markets. This has affected the demand for housing. But since there is a constant supply of residential projects, rates tend to move up”.
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In the new launches category, developers are offering higher discounts.

“As of now, prices have dropped in areas such as Parel, Lower Parel, Mahalaxmi, Bandra East, Andheri East, Goregaon East and Mulund and Kurla. It is fairly certain that this correction phase will continue for the next three months and inevitably extend into the traditionally slower monsoon/ vacation period,” said Sanjay Dutt, chief executive officer (business) at property consultant firm Jones Lang LaSalle India.”

Another indication of a likely price drop comes from the findings of a Mumbai-based consultancy firm Religare Capital Markets Ltd. The report says the inventory, or unsold residential units, has shown an uptrend in the past few months.

Tightening liquidity, rising interest rates and lower offtake in housing projects will also add to rise in the inventory. This may lead to a situation when developers will be under pressure to lower their rates. The report added that after a 20-30 per cent increase in prices over the past 1-1.5 years, rise in prices has moderated in Mumbai and Gurgaon.

Source: March 18th 2011, Realty Plus