{"id":3264,"date":"2015-02-10T22:36:34","date_gmt":"2015-02-10T17:06:34","guid":{"rendered":"https:\/\/teekhapan.wordpress.com\/?p=3264"},"modified":"2015-02-10T22:36:34","modified_gmt":"2015-02-10T17:06:34","slug":"despite-rising-number-of-unsold-homes-real-estate-prices-continue-to-rise","status":"publish","type":"post","link":"https:\/\/vivekkaul.com\/2015\/02\/10\/despite-rising-number-of-unsold-homes-real-estate-prices-continue-to-rise\/","title":{"rendered":"Despite rising number of unsold homes, real estate prices continue to rise"},"content":{"rendered":"
The Confederation of real estate developers association of India (CREDAI) a real estate lobby, has written to the government to provide relief to the real estate sector in the upcoming budget which is scheduled towards the end of this month.
\n“We want infrastructure status for real estate apart from that there should be exemption from the tax and less formalities to obtain home loans for the buyers,”\u00a0<\/span><\/span><\/span>a CREDAI official told the Times News Network<\/span><\/span><\/span><\/a>.
\nThese moves, the lobby believes, will provide the sector some “cheer”.
\nBefore this, CREDAI had constantly been talking about the need for the Reserve Bank of India(RBI) to cut the repo rate or the rate at which it lends to banks. Raj Modi, president of CREDAI in the National Capital Region had said in January 2015 : “We have been raising the concerns of developers over higher rates from the government. We are happy that RBI has taken a step by cutting the rates. We expect that this will encourage banks to ease their home loan rates…This will help developers to expedite their projects which were otherwise facing fund crunch. Home buyers’ dreams of owning a home would also get a boost as we expect an accelerated purchase cycle.”
\nThis comment came after the RBI decided to cut the repo rate by 25 basis points to 7.75%:
\nThe position taken by CREDAI till date seems to be that people are not buying homes because interest rates are high. If RBI starts cutting the repo rate it will lead to banks cutting the interest rate they charge on their home loans. People will borrow and buy homes. And everybody will live happily ever after.\u00a0<\/span><\/span><\/span>
\nOnly if things were as straightforward as that.\u00a0<\/span><\/span>I have explained in the past<\/span><\/span><\/span><\/a>\u00a0that the major reason why Indians are not buying as many homes as they were in the past is because prices are too high in comparison to the income of people. Further, despite slowing sales, most real estate companies and builders have not budged and refused to cut prices.
\nThis becomes clear through the research report titled\u00a0<\/span><\/span>India Residential Market Preview<\/i><\/span><\/span>\u00a0for the period October to December 2014, released by Liases Foras, a real estate research and rating company. The research report provides data for six cities (Mumbai Metropolitan Region, National Capital Region, Chennai, Bangalore, Hyderabad and Pune).
\nThe report clearly shows that sales continue to remain slow as the total number of unsold homes pile up. “The unsold stock rose 17% from 709 mn SqL in Dec 13 (Oct to Dec 2013) to 832 mn SqL in Dec 14 (Oct to Dec 2014),” the report points out. Yearly sales across the six cities that the report covers declined by 1.1%.
\nDespite huge number of unsold homes and falling sales, home prices continued to rise, though not at the same pace as they have in the past (as can be seen from the accompanying table).\u00a0<\/span><\/span><\/p>\n