Real estate market could come back to price correction
Sensible economics suggests that if developers can’t sell at high prices, they should cut rates and find buyers. Anecdotal evidence suggests that many builders are selling land holdings to finance loans, rather than cut prices. This too is good, because it will bring more land back into the market, creating further pressure for property prices to fall.
A full 25% of total units remain unsold in Mumbai , where real estate rates are the least realistic. Chennai and Pune follow with 19% units unsold, 16% of units can’t be sold in Delhi and its surroundings, followed by Bangalore and Kolkata. Developers who find themselves unable to sell built units cannot pay back loans and find it hard to raise capital for new projects.
For many years, India has not seen a property crash, so many people still believe in the phrase ‘safe as houses.’ But globally, property has been prone to long cycles of price appreciation and decline. For salaried professionals , cash was never an option, so the easy money, low interest rate regime earlier was a good time to get cheap mortgages and buy homes. But with interest rates hardening , these people have become cautious about what prices they’re willing to pay for real estate. This too is welcome.
People have become cautious about what prices they’re willing to pay for real estate. It will force builders to build homes that buyers can afford, rather than try and peddle overpriced merchandise . All markets have gone through corrections, it’s time real estate also got its reality check.
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