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Residential Real Estate Prices are Falling Across India

Submitted by TheIndiaStreet on May 14, 2008 - 1:10pm.
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Gold Coast Residential: Mumbai IndiaGold Coast Residential: Mumbai IndiaThe residential transaction level has moved down considerably in various markets. It has resulted in price reductions in a lot of the Tier 1 markets.  This is mainly due to residential capital values in some Tier 1 markets have shown negative growth in the last quarter. We’ve been tracking capital values in the Tier 1’s in Bangalore, Mumbai, Chennai, Hyderabad, and Delhi NCR  and the overall result is a reduction in price or no increase.  We believe India is in a short term residential real estate market correction and to look for real estate related stocks as an indicator for a change to the positive.   

 

India’s real estate stocks indicate how the market views real estate about 6 months out.  Any positive sentiments will appear there first.  After the recent stock market correction, real estate stocks have been trading at a discount of 15-50% to their net asset values (NAVs), or the value of their assets less liabilities.   

 

The recent drop in their values will likely stay until property developers start pulling back on supply, and focus on selling the existing stock.  Property stocks are overvalued and a correction in stock prices was imminent.   

 

The resultant demand and boom also resulted in speculative buying, or flipping —holding properties for a short while to cash out on gains. Developers need money and if they can’t sell projects at the current high price levels they will have to bring down prices.    p>Cities like Gurgaon have seen a correction of 15 percent, while the plot rates have come down by 20 percent in Noida. In Greater Noida, the plots which were selling at Rs 55000 to 60000 are now available for Rs 40,000 to Rs 45,000. In Indirapuram, rates of flats have come down to Rs 2500 to Rs 2700 per square feet from Rs 3000 to Rs 3200 per square feet. 

 

Even the best areas in Delhi - GK I & II, Prithviraj Road, Friends Colony, Maharani Bagh, and Hauz Khas have witnessed a 5-10 percent correction.  Like any real estate cycle, this shall to change.  Look to real estate stocks for the indication.
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