Handling the slumps of realty
One of the biggest questions for all policy makers to ask is whether the housing market can come back on track without making any price correction. When realty stocks begin to rise and the firms which are in debt currently ask for cuts in interest rates in order to bring back the market in existence, the interesting counterpart here becomes the upcoming inventories, the incomes that are declining but prices of houses that are rising.
There is usually an expectation that prices will be adjusted when the demands fall and capacity increases. The equilibrium of demand and supply is restored and this makes way for transactions to start again. However one will never see such mechanisms at work in the Indian property market, where the correction of prices has lead to some deceleration but hasn’t been enough to sell the current stock.
There is high possibility that activities will not resume without the adjustments in prices in order to dispose all the stocks which haven’t been sold yet. If we try to understand the housing prices in major cities from the year 2007 and 2013, we will notice that in the year 2007, the prices have doubled up in a very short time. In the year 2013, the prices did moderate a bit in a few cities as they fell in one and rose in another. In about 12 major cities, there was a price rise which went up to 7%. This vital piece of information was given away from the National Housing Bank in the last week.
Source – Renu Kohli
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