Unaffordability created by the surging prices inversely affected the residential sales. Most of the top cities are affected by fall in demand and residential sales.

Residential Sales Faces Trouble Mainly from Surging Prices

Real estate builders normally foster residential sales by granting discounts. This is not seen in the present real estate situation. The real estate builders seem not willing to lower the prices at any cost. They point to the increased cost of production.

Residential sales were mostly affected in New Delhi and Mumbai. Comparing to the previous year, prices have far gone up in these areas. The report of real estate consultancy firm PropEquity shows that residential sales have gone down by 42% in 2012.

Real estate experts point to the fact that the prices have doubled in Gurgaon. This has caused a saturate situation in Gurgaon. This forces the real estate builders to concentrate their construction in remote areas with undeveloped or underdeveloped areas.

According to PropEquity report residential sales in Mumbai are down by 34%.  Mumbai Metropolitan Region (MMR) witnesses a 4. 1 % rise in the average price to reach around   6354 per sq. ft.

Residential sales however remained steady in Bengaluru which witnessed only a 3 % drop in sales. PropEquity’s Gaurav Pandey points to the affordable prices existing in the city as well as the higher demand from the IT professionals as reasons for this. In the city the average price has reached 3,797 per sq. ft. with the growth rate of 14 %.

RBI’s real estate index states that the property prices on a year-on-year basis improved by 24.1% in the third quarter. RBI index further stated that this growth rate of 24 % is comparatively higher than the average rate of 20 % which happened in last two years.

Shveta Jain, (Executive director of global real estate consultancy firm Cushman and Wakefield) opined that the growth of prices create a situation in which majority of the people find it unaffordable to buy a home. Adding further she continued that this high level unaffordability is the main cause of fall in demand.

Higher prices keep even the investors also away. Real estate is termed as the most preferred option of investment. Yet the situation shows that the real estate investors are finding it difficult to sell their homes.

Basing on the average value   6354 per sq. ft. a 1 BHK apartment will cost nearly 65 lakhs.in Mumbai. At the same time for a normal 2 BHK will cost nearly 1- crore in MMR.

Increased interest also causes fall of residential sales. Higher interest home loans drive the people away from purchasing a home. Jain said that however value appreciation too plays a vital role in the residential sales.

The figures show that NCR has witnessed a severe fall in residential sales which fall from 81,725 during January-August 2011 to 47,363 in 2012 January-August period. Meanwhile comparatively MMR witnessed a fall from previous year’s 68,740 to 45,049 in the current year.