Real Estate Prices should Drop More

November 18, 2008	(3 votes, average: 3.67 out of 5)  Loading ...
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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 today, 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 20 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.

Prime Minister Manmohan Singh told the Group of 20 nations meeting in Washington Nov. 15 that India’s pace of economic expansion may slow to between 7 percent and 7.5 percent this year, from an average of about 9 percent in the past four.

The government and the central bank have taken fiscal and monetary steps to shore up growth and unlock a credit freeze that has made it harder for companies and individuals to borrow.

The central bank has cut its benchmark lending rate to 7.5 percent from a seven-year high of 9 percent. It also pared the amount lenders must set aside as reserves to cover deposits by 3.5 percentage points in a month, freeing up as much as 1.4 trillion rupees ($29.5 billion) in cash to ease lending.

News Published Under:   Real Estate India, Property Prices |

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