Buyers shy away as realty gets costlier

AHMEDABAD: Nisha Parekh, a 30-year-old professional, has been hunting for a suitable residential space for her nuclear family in Ahmedabad. Over eight months have passed and Parekh is unable to find one, despite increasing her budget from Rs 25 lakh to Rs 35 lakh.

There are numerous other young buyers who have not been able to buy homes after prices skyrocketted by about 30% since property markets picked up pace in August 2009. “In the last few months, we have seen several short bursts of price rise, so much so, that in spite of increasing our budget by Rs 10 lakh we have been unable to buy a decent living space within the city,” says Ms Parekh who till recently was working as a researcher with ISRO.

The steady rise in prices of homes seems to be turning off buyers in bigger cities as well. Certain pockets in Mumbai, NCR and Bangalore have been reporting about 30% drop in sales as compared to the peak sales registered in December 2009. With an impending hike in bank loan rates, real-estate experts now feel that a price correction of 15% could restore the buoyancy in the markets.

“The rising prices of residential space are affecting sales of homes,” Pranab Datta, VC & MD, Knight Frank India, a privately-owned global realestate agency and consultancy, said. Mr Datta describes the residential scene in Mumbai. “Mumbai saw a dip in the volume of sales during the last couple of months. The city hit a peak of approximately 9,000 registrations in December 2009, but February 2010 saw only around 6,000 registrations. This clearly shows how buyers are turning more and more hesitant to purchase houses at inflated prices,” he adds.

“In Mumbai, prices have already touched the peak witnessed in 2008,” Mr Datta said. “And since realtors have realised that the volumes of transactions have reduced, they will eventually offer inducements to attract home buyers. A price correction of around 15% could bring back buoyancy into the market, based on various indications,” he said adding that a situation could soon arise where realtors will be forced to re-introduce certain schemes and discounts that were done away with.

“Realtors are focusing primarily on premium projects, all priced at greater than Rs 40 lakh. This is proving to be too unaffordable for buyers , even with the economy stabilising and improved job security,” he said.