Press Trust of India / Mumbai Jun 27, 2010, 11:47 IST
Even as realtors are upbeat about growing demand in their sector, the industry stands divided over a possible correction in the skyrocketing prices of residential properties in major Indian metros.
Over the past few years, property prices in most of the Indian cities have appreciated by over 250 per cent while the economy was growing at 8 per cent annually.
"The spiralling price in real estate, especially in the residential segment, is a big concern today. Such a sudden rise in property prices is not sustainable and there is an immediate need for correction," Mahindra Lifespaces' Vice-Chairman, Arun Nanda, said.
Some correction in property prices is expected over the next few months, he said.
"A few builders have become greedy and are running a cartel. Those who have increased prices are not doing any business. There has to be a correction somewhere," Nanda said.
The Government should come out with some special schemes for affordable housing so that builders can get land at reasonable rates, the Mahindra official said.
However, Niranjan Hiranandani, Chairman of Hiranandani Developers, that is mainly in luxury and premium housing, said a correction in prices was unlikely in the near future.
He was, however, of the view that there should be housing schemes for all segments.
"The Government should come out with schemes for every segment. Let's create a house for all and this is not difficult...We have done this in telecom and other sectors and were successful," Hiranandani said.
"Huge investments have been made in the sector and the bubble is going to burst. However, (this would) not (happen) in the near future," he added.
There should be more development in the infrastructure segment in order to support the realty sector, he said.
Advisory and research firm Jones Lang Lasalle Meghraj's Country Head, Anuj Puri, also said there were no signs of an immediate correction in residential prices.
He said the slump in Indian real estate was not directly due to the global recession but increasing demand for space, both commercial and residential, that pushed prices up and inflated the market.
"The demand was huge and prices went up unrealistically. The blow came when buyers refused to pay unrealistically high prices and the inventory piled up," Puri added.
The outlook on residential segment was positive as 2010 will be the year of affordable housing.
The bubble has to burst. The question is when? The author is right that the builders to artificially maintain the price, to lure the innocent masses to buy their project, have created a cartel. Government also seems to support them by offering deferment / rescheduling of their loan dues.
However, the big question remains as to how long this process can continue? US have seen the crisis, but we are living in fool's paradise thinking that such a thing cannot happen in India. Best advice for middle class shall be to accumulate their savings and wait for the crash / correction to buy the property.
Ripon Malhotra
FCA. LL.B.
E-mail: ripon9@gmail.com
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