Saturday, October 22, 2011: 09:45:00 PM

TJCD Trend

No Dhanteras dhamaka for real estate

The property market in India is expected to remain slow during the occasion of Dhanteras, but industry people are confident of an uptake soon

Property buying during the festive season of Diwali is a common trend in the Indian real estate market. Unfortunately, the trend is likely to suffer a jolt this year, opine industry experts and analysts.

 
Some analysts blame rising interest rates to act as a major dampener for residential real estate purchase on the occasion of Dhanteras or Dhantryodashi, an auspicious daycelebrated 2 days before the Diwali festival. This increase in interest rates of home loans is direct fallout of the RBI’s move to raise key policy rates for 12 times over the last 18 months to counter the persistent high rate of inflation.
 
A recent report released by the global credit ratings company Crisil reveals that the rising interest rates and reset of teaser loans have led to a significant increase in the equated monthly instalment (EMI) for home loan borrowers. Calculations show that the annual additional burden stands at around Rs 6,000 crore on home loan borrowers, reveals the report.
 
According to SK Singh, assistant general manager at Allahabad Bank, increase in repo rate by the RBI has made home loans costlier. Borrowers are not able to feel the effect immediately as they are given a lean period of 2-3 years during which the interest rate remains fixed, even if borrowers opt for a floating interest rate. These are termed as teaser loan schemes and the increase is adjusted with existing market rates, once the initial fixed term gets over. CRISIL expects that loans sanctioned under the scheme will be adjusted with prevailing market rates by April 2012.
 
Industry speak
 
Such increase in home loan rates has made potential buyers sceptical about the domestic real estate market. However, traders, developers and brokers feel that the current situation will hardly have any long-term impact. According to Sanjay Mishra, managing director of Yashraj Enterprises, the hike in interest rates may dampen buyers’ confidence temporarily, but will not have any long-term effect. Dhanteras is a good time for real estate business as the market experiences slump in monsoon, which is again followed by Shraadh when people abstain from buying anything new, he added.
 
Presenting a differing viewpoint, Ankur Gupta, joint managing director at Ashiana Housing Ltd, a renowned property developer headquartered in New Delhi, said, “We are not feeling any pinch at present. Due to limited supply in the NCR, property uptake has been slow in the past few months. We expect an uptake in sales post Diwali. Further, there is a possibility that prices may correct in the near future, but this depends on pocket to pocket.”
 
“Property market in Kolkata has been slow for the last few months. We do not expect any significant surge during the Dhanteras in the city’s real estate business and this would continue for some time as the market is speculative at the moment due to change in number of policies such as land acquisition,” said Saurav Ranjan Datta, marketing head (Retail and Commercial) at Shriram Ozone Group, a reputed property firm headquartered in Kolkata.
 
Elaborating on the property market further, Mr Datta said that there is an acute shortage of land in the main city, hurting developers’ sentiments. Demand for property in the emerging real estate hotspot of Rajarhat is likely to increase only after 5-10 months. However, RBI move will not have any impact on the Kolkata market.
 
It, therefore, seems that Dhanteras may not light up brightly for real estate business this year as people are trying to gauge the market trend and plan accordingly.
 
Jeeta Bandopadhyay

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