Thursday, September 12, 2013

Chennai real estate prices show a correction in Residex scores

Real Estate prices across Chennai market has seen a correction across the board according to the Residex scores released recently.  This is mirroring the trend across India.  The prices which has fallen the steepest in Chennai are Myalapore and Velachery.  

With the recent RBI action of stopping the 80:20 schemes, the builders would be under higher stress for funding.   They have been valiantly holding on to the price levels but something to give. In the earlier instances, the buyers had given in but this time my hunch is that the sellers would give it in.  They would no longer be able to borrow to support the prices artificially. If few desperate sellers start the distress sale, all others would fall in line.  

As far the real estate prices are concerned, I believe that further price drops are possible in the suburban areas.  Already the builders are open for negotiations on price and instead of being selective; they would announce price cuts across the board.  The number of unsold flats in the suburbs is a good indication of the impending possible price correction.  

The spate of new launches has gone down and the classifieds section in newspapers has more advertisements for sale.  I recently read that during the 90’s real estate meltdown, the prices corrected by more than 40% over the period of 1996 to 2000 in Mumbai. Is it fair to expect the same amount of correction across the board? May be, not.   The price correction would be location specific.  

I think it is becoming buyers market after a long time. 

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