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Real Estate Developers Thinking of Rate Cut
Real estate developers in India should lower prices given the general slowdown in the economy, the Confederation of Real Estate Developers’ Associations of India (CREDAI). “Some developers across the country have already reduced prices, CREDAI now requests all its members to do the same,” the real estate body, which counts over 3,500 developers as members. No fixed percentage in price reductions could be recommended due to the vast diversity of prices of real estate across India. The continuing economic slowdown has led to a fall in growth rates and potential loss of employment to many of the 10 million skilled and semi-skilled workers in the real estate sector.
Property prices in India need to decline further before demand picks up, said Adi Godrej, who heads the Godrej group of companies that has interests in property, consumer goods, and electrical and office equipment. There has already been a correction in property prices, he told reporters at the World Economic Forum’s India Economic Summit in New Delhi , without elaborating. The group has real estate projects in Mumbai, Kolkata, Bangalore and Pune, according to its Web site. Property prices are dropping across India as a slowing economy erodes demand for homes and office space. House prices in smaller towns such as Agra, Ludhiana and Kochi dropped an average 15 percent to 20 percent, according to Jones Lang LaSalle Meghraj Property Consultants (India) Pvt.
Rental prices for offices and malls also fell by as much as 25 percent across India in the quarter, the firm said. Developers in bigger cities such as Mumbai and New Delhi are holding prices steady, Jones Lang LaSalle said. The global financial crisis is leading Indian stocks to the worst year on record hurting purchasing power even as a five-year rally in property prices and an increase in borrowing costs is hurting sales. DLF Ltd., India’s biggest developer, on Oct. 31 said profit fell 4 percent for three months ended Sept. 30 as the slump in stocks and faltering economic growth lowered demand for luxury properties and higher input costs increased expenses. Realty Stocks Drop The Realty Index of the Bombay Stock Exchange has declined 85 percent, faster than the 56 percent drop in the benchmark Bombay Stock Sensitive Index or Sensex. Godrej says demand for consumer goods is still “reasonable” amid the economic slowdown. Godrej doesn’t plan to increase prices of consumer products for the next few years as costs have eased because of the drop in rates of commodities such as crude and vegetable oil.
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