Home Loan Rate Hike to Pull Down Property Prices

April 4, 2007	(1 votes, average: 5 out of 5)  Loading ...
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Increasing interest rates have not just brought bad for consumers but good as well. Surprisingly, it is no joke. Prices of residential property across the country have gone down by 5% to 10% in the secondary market.  As far as the new housing projects are concerned, builders and property developers do not seem to cut the prices any further.

Complying with the RBI’s decision to tighten the money supply and add to the benchmark interest rates, banks have increased rates by 0.50 to one percentage point.

Increasing interest rates can pull down the construction activities and would lead to increase in prices in medium term with high development cost, says CMD of a construction company.

Nearly all the builders who had launched their real estate projects in the last one year are about to complete all. Moreover, these projects are already sold out.

Talking about other projects, builders have already sold the portion they intended to sell. The remaining portions are normally sold as the construction progresses.

Not the private builders but the government agencies are responsible for the hike in real estate prices, says Pradeep Jain, CMD of Parsvnath Developers. The authority sold its land on the prices higher than the actual price. In such a situation, the government thinks of developers cutting the prices of finished products.

The increasing interest rates and creation of fund crunch would lead the property developers to postpone the launch of new real estate projects unless they ensure the demands for the units they would introduce for development, says a senior builder.

As for small builders who do not put hands in large real estate projects, would be forced to launch the projects to raise money to pay for their expenditure. There are not many builders who acquire their own land and have to launch the projects to meet up the financial crisis.

Increasing interest rates are preventing the potential investors to make investments in India properties. Property prices are certain to come down further because of home loan rate hike especially in some peripheral locations.

News Published Under:   Banking and Finance |