For property buyers in the big metros, the cool winds of a price fall seem to be finally blowing this summer. After two years of a continuous price spiral, residential property prices have begun to stabilize and even come down over the last month.
Property consultants and developers agree that the sudden jump in home loan rates, that have touched a high of 12 per cent, has led to a drastic dip in sales in recent months. This in turn has forced builders to ‘correct’ prices.
"The home loan rates coupled with high property rates have created a scare in the market. I have not been able to close a single transaction in the last three months. Builders have no choice but to either slash or keep the prices stable top encourage property buyers," said Arvid Bhanushali, a property consultants in the central suburbs
The summer months are a hectic period for home buying as it allows families to shift and plan when their children are holidaying from school. However, for builders it has been a dry spell with few transactions. Normally, builders make the most of the months of April, May till June before the monsoon, when few deals happen.
A Dheeraj Housing project in Santa Ccruz west which touched a high of Rs 7,.800 per square foot has come down to Rs 7200 per sq ft. Another project by Raja Builders in Khar (west) near the station, which was selling at Rs 12,000-13,000 per sq ft, has come down to Rs 11,500 per sq ft.
Builders fear that many buyers would pull put out of deals being processed after they find that the EMIs are much higher than what they bargained for. "Buyers are backing out because they have to shell out 15-20 per cent more than what they had anticipated when the interest rates were lower," said Bhavesh Khetia, a property broker.
With another CRR rate review expected by the Reserve Bank, and another hike in home loan interest rates on the cards, demand could slump further forcing a further correction in prices. Khetia forecast property rates coming down by at least 15 per cent.
Currently, in most of the suburban projects, prices have been stagnant for the past month and are likely to remain that way. Projects on Film City Road, Goregaon are stable at Rs 6,500-7,000 per sq ft and rates in Powai are between Rs 5,700-Rs 7,000 per sq ft.
In fact, to encourage sales, a few builders have also converted the mode of payment into a full 'white' transaction so that the loan is applicable on almost 95 per cent of the total amount.
Builders, on the other hand, are divided in their opinion on property issues. While a few builders admit that there has been a correction in prices, most think that it is difficult for prices to come down.
Khar-based builder Shamshu Lalani, Director of Lalani Group said that prices have stabilized because of high interest rates and there would only be a slight annual escalation of prices. The Lalani Group has just recently opened bookings on Godbunder Road, Thane at Rs 3,500 per sq ft much lower than the nearby Hiranandani project which is selling at Rs 5,000 per sq ft.
However, Mukesh Patel, a member of the Maharashtra Chamber of Housing Industry (MCHI) said that correction in prices is unlikely in the suburban projects and is likely to happen in areas like Bandra, Mahim and south Mumbai. "The margin which developers get in these areas is much higher which is why even if they slash prices, they would still benefit. But a developer in Thane would find that difficult because construction prices are the same but the profit margin is lower."
10. Dheeraj Housing project, Santacruz: Rs 7,200 per sq ft (was Rs 7,800 per sq ft )