Property prices, supply to remain stagnant till March.
With the bearish conditions set to linger in the new year as well, the Ahmedabad realty market may witness continued stagnancy across commercial and residential properties in first quarter of 2012.
Till December 2011 already, the city, especially in the western parts, saw a dip of 20 per cent in residential property buying throughout the month, said experts.
"Last 4-5 months market movement has been pretty slow due to high property prices and high interest rates. We don't expect the market to move at least in the first quarter of calendar year 2012 until developers reduce prices or interest rates cool off from April onwards," said Nirav Kothary, regional director of Jones Lang LaSalle India (JLL).
According to industry sources, while the real estate developers postponed reducing prices, end users stayed away from buying properties in the wait of a possible correction.
"Real estate developers are facing cash crunch. They also have been borrowing not only from banks but also from non-banking financial companies (NBFCs) at enormous rates such as even 24 per cent. Which is why they have not been reducing prices as of now," Rajeev Shah, managing director, RBSA Advisory Pvt. Ltd told Business Standard earlier.
Moreover, buyers have also been waiting for prices to lower down since some months in Ahmedabad. The October-December period alone has seen decline in residential property buying by 20 per cent.
On the supply side, except for a couple of large projects, developers have restrained from announcing new properties till December. Moreover, according to Kothary, supply may remain dried up in the whole of first quarter of 2012.
"Whatever margins the developers were left with to cushion them from price reduction were eaten up by high cost of construction. With the rise in prices of inputs like steel and cement, developers have been losing margins thereby discouraging them to reduce prices," Kothary added.
Earlier, property prices did take a hit but only for around 10 per cent correction. Kothary attributed the slowdown in property bookings to factors like artificial hike in property prices, hike in home loan rates and more supply of high end properties.
"These factors have resulted in heavy recession in the real estate market in Ahmedabad, especially in residential properties. Add to that, developers didn't reduce prices as expected which discouraged end users from buying properties during the festive month of October. However, a correction in residential properties may be expected in the next few months," said Kothary.
Meanwhile, as per industry experts, since January, real estate brokerage firms in Ahmedabad have seen a slump in business by about 30-40 per cent. Property bookings have also been on a downhill since couple of quarters now in Ahmedabad.
