Falling sales, dropping prices and cash shortages have cause the cancellation of more than 450 real estate projects in Pune, leading to around 5,000 construction workers and many others being made redundant.
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Real estate developers in India have begun concentrating on budget homes instead of luxury developments. Prices have been falling and demand has been weak for luxury property in India for some time now, but recent government incentives in the form of interest reductions on smaller mortgages and government payouts have given a much needed boost to the “affordable,” segment of the market.
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For the past few years, mostly since the IT boom and lot of NRI’s pumping money into real estate in India, prices, especially in the major cities, have skyrocketed. Chennai is no exception. Chennai, located in South India, where most of the IT companies started booming, witnessed a very high appreciation in property prices over the last few years. Flats are being priced at around 4500 per sft in areas like Egmore.
Budget 2008 has not done much for the real estate sector in India, but the change in income tax rates, mean that there will be more money in the hands of the prospective home buyer. Coupled with this, construction costs are expected to come down on account of reduction in duty and Cenvat. But Housing loan interest rates have not come down meaning that EMIs continue to worry prospective buyers. Will all these translate into a higher demand for housing in Mumbai? The last four years have seen a tremendous price hike in retail housing sector on account of demand far outweighing supply. Out of the 90 lakh homes on sale in Mumbai, only 30% have been built. Prospective home buyers may start scouting for affordable property in surrounding areas like Nasik and Pune. A recently released report on the ‘Housing ‘un’affordability in Mumbai’ by CRISIL underscores the fact that owning a home in Mumbai remains out of reach for more that half the population of Mumbai. While buying a home in Mumbai will remain a dream for the lower middle class, prices for properties in the range of Rs 40 – Rs 50 lakh should see a much needed correction.
