Home builders across the country are putting up a brave front in the face of rising interest rates for home loans and softening of prices in some key markets, saying demand for new homes is likely to continue.
“We are going ahead with our projects with the hope that there is going to be some kind of reversal in the trend of rising interest rates,” said Mayur Shah, managing director of Mumbai-based Marathon Realty. “Inflation could also come down a bit in the next three-six months. So, if people don’t buy today, they will definitely come back tomorrow.”
While there has been a softening of prices in certain tier-I cities, especially places where real-estate prices had jumped over 150-200% per annum in the last two-three years, builders are confident that the fall will actually stoke additional demand.
“Prices have already corrected by 5-7% in certain locations in Mumbai. The demand is still strong in tier-II cities,” said Joygopal Sanyal, vice-president, Trammell Crow Meghraj.
“There is a slight correction in the land prices, but the apartments continue to be in demand,” said Shalini Vig Wadhwa, a spokesperson for New Delhi-based DLF Ltd. Added J.C. Sharma, MD of Bangalore-based Sobha Developers Ltd: “Housing is a need, so people will buy it.” Sharma also claimed that the company had sold more flats in the last few months than when interest rates on home loans were in the single digit.
While industry analysts feel that the slowdown could also impact real-estate projects in the pipeline, some developers aren’t so sure. “No, I am not rethinking on my future projects at all,” said Dharmesh Jain, CMD of Mumbai-based Nirmal Lifestyles.
A Fitch Ratings India report on Indian real estate said that “while the cost, and to some extent, availability of loans is likely to be constrained due to regulatory interventions arising out of the fear of overheating property prices, this is not likely to significantly affect demand from the end users.”
Interest rates on home loans have gone up from 8% to almost 11% per annum over the last few months. As a result, “there certainly is a slowdown and will continue for sometime. But the slowdown is not a meltdown”, said Ambar Maheshwari, director, investment advisory, DTZ Debenham Tie Leung, a global commercial property advisory firm.