Rising interest rates, shrinking pool of home buyers and anticipated fresh supply of DDA flats has set off what could be termed as early signs of panic among real estate investors in Delhi and its suburbs.
A large number of investors are wary of holding the property any longer and are turning it back to developers or pushing property dealers to find buyers fast. Industry experts, however, feel end-users should not rush into buying property at present and wait till the festive season, following which there could be a major price correction.
HDFC executive said, “A rising home loan rate has badly dampened consumer sentiments. July was bad and August will be worse. The latest round of loan rate hike would sink in over the next few weeks and its impact on home buyers could be visible by the end of this month.
He said that home loan inquiries have fallen by 35-40% in Dwarka, one of the biggest colonies of Delhi, which offers a large supply of apartments. Dwarka, which has seen prices move up almost four times in the past five years, is witnessing fewer transactions these days. Besides rising borrowing cost, an anticipation of DDA house allotment too is keeping buyers out of the market, say property dealers. DDA is likely to allot 5,500 one, two and three bed room apartments across Delhi over the next few months.
A shrinking pool of buyers has made investors a little jittery in Delhi, Gurgaon, Noida and Ghaziabad. Many investors, fearing that the markets may worsen in the coming months, want to exit with the gains they have already made. Some of them have turned the property back to the developers. In many cases, investors have an option to sell the properties back to the developer at an agreed rate. In a market, where an investor thinks his property may not fetch more than the agreed price, he sells it back to developer. A Ghaziabad-based developer recently bought back over 25 apartments.
Despite early signs of scare setting in among investors, prices remain stable in Delhi but have corrected by 10-15% in suburbs. Experts feel a deeper correction could be in the waiting. Knight Frank India chairman Pranay Vakeel said, “What we are seeing today is only the tip of the iceberg. We may see a deeper correction in November”. He says end users should wait, as developer intend to hold prices till festive season. Further he said, “Developers are banking on festive season to lift sales. But if it fails, they will have no option but to cut prices to sell”.