Real Estate Growth Impacted Due To High Interest Rates

Leading home loan lender ICICI Bank said that growth in the real estate sector has been impacted due to high interest rates and prices but maintained that there was no asset bubble in the sector.

ICICI Bank Joint Managing Director Chanda Kochhar said, “Clearly there is a slowdown in the number of deals …interest rates have gone up from 8% in the past to now 12% and prices too have gone up but an asset bubble is not there”. She further said that a correction was expected as the present slowdown was in number of deals and not so much in prices.
She added, “Since it is genuine demand in general and the salary levels are increasing, both customers and builders are playing a wait and watch game”.

Kochhar said that builders were able to hold prices as they were sitting on equity capital and not debt, which had to be paid off.

She added “Now they can afford to sit with the capital and that is the reason why prices have not corrected…the question is who will blink first”.

She said that in India the speculative part in real estate had always been small and growth was largely driven by actual demand and affordability of people.

One Comment

  1. Posted June 9, 2008 at 2:44 am | Permalink

    Many expect a further correction in home prices in India. Since the volumes of property transactions are going down, hence the asking price for property will also go down. Additionally, over-supply of property is posing as a major reason for the slow down in Real Estate prices.Recent media reports have also suggested the same trend. Reports suggest that Real Estate Prices in Mumbai, Bangalore, Pune, and National Capital Region have corrected 15-20% in the first quarter of this year. Market-watchers say that this trend will be repeated across the Tier II cities and suburbs too. No wonder property developers are wooing prospective users with all sorts of offers. Some are even offering lower EMIs for flats while some are offering goodies like cars along with property. Still others are wavering off the stamp duty prices.
    Are the property prices coming down in your area? Is the property slow down really impacting the end user in a major way? Should the home seekers cheer for some reasons? Is there a possibility of a market dive? Or is this a temporary phase in the housing segment?For more view-

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