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An Analysis of Factors Affecting Indian Realty
K.P Singh, the Chairman of India’s largest real estate company DLF Ltd. sheds light on factors affecting the pace of Indian real estate. According to him, it’s stringent monetary policies and subsequent high mortgage rates.
Prices of residential property in India would only begin to fall in a fast flourishing economy with an increase in supply, says Mr. Singh. He also adds that property prices will take a slip only if pushed by increased supply and not mere monetary policies.
The Reserve Bank of India (RBI) raised interest rates five times since March 2006. The authority has also lifted banks’ reserve requirements to curb rising inflation and credit growth.
This created a need for commercial banks to raise lending rates including those on home loans by more than 200 basis points.
Another factor affecting Indian property market is increasing interest rates on home loans. However, growth in home loans may slow to 17-20 per cent in the current fiscal, as per the data showcased by the Associated Chambers of Commerce and Industry.
Mortgage loans have risen by 26.6 per cent in the last financial year. And it was lower than 29.1 per cent in 2005-06. And, the sale of residential property in India has seen a sharp downslide by over 70 per cent in May-June 2007.
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