India’s Property Market Sees Sharp Decline

According to Indian real estate analysts, the property market in India, once booming, has ground to a halt over the last two months with a huge drop of 50% in the number of property transactions. For the first time in three years, property investors are actually having to drop prices to bolster demand.

Developers on the edges of big cities have found the past couple of months difficult, with prime locations within city centres holding their prices best. An example of this is Khargar, on the edges of Navi Mumbai. The prices here have declined by up to around 20%, however the prime location hotspots of the Palm Beach Road Promenade and the land around the proposed new airport have not seen any declines in prices.

Part of the problem has been the confusion over zoning and FAR (the floor are ratio or FSI) as well as a rising rate of interest for home loans. This has lead to buyers holding back from buying any property, and so prices in non-prime areas have dropped. However, high-end properties in mid-town locations as well as good quality commercial property has not seen any effects due to over-demand and under-supply.

The lack of buyers has hit loan companies and banks the State Bank of India saying that their current growth of about 25% was unsustainable in the current market, and they were settling for growth of 20% instead.

It’s not all bad news for homeowners though – the drastic drop in sales is pushing up the rental market. So if you are looking to invest, housing in city centres is prime for excellent rental yields. And if you are in it for the long run and are happy with something high risk, there is some excellent, cheap land around the outskirts of most major towns which could potentially reap rewards in the future.

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