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Shvoong Home>Social Sciences>Economics>Realty comes down with rising interest rates. Summary

Realty comes down with rising interest rates.

Article Summary   by:jess12     Original Author: anonymous
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Realty comes down with rising interest rates.

The residential property market is trailing behind, attributed to mounting interest rates and extra domestic demands. The soaring records in industry sometime ago soon came rolling down to 50-60%. In the last 3 months most of the buyers have ceased to invest in market compelling developers to control the rise. In over a year the interest rates have increased four times. The increase in CRR by 50 points in two phases by the RBI, are intimidating the new rates by commercial banks. The descending sales might force developers to slash the prices.

The residential market got stimulated in 2 yrs due to low rate of interests. This unusual shoot in real estates is being curtailed by the govt., by increasing rates, introducing new taxes on commercial rentals and withdrawing benefits of Sebi-registered funds. The RBI had warned of fizz in Indian realty and has stopped foreign venture to fund in realty sector. The developers have confirmed the appalling position. Many industry heads have shown their apprehension on RBI’s new move, as the demand supply is inclined towards the former. Small cities are the first to show the drop of 20-30% in overall sales. These residential units went beyond the reach of many people. The CRR rate hike would increase adversities of buyer. most of the realtors think it was an improper way of controlling demand by imposing hike on interest rates.

Many new buyers are shelving their plans of property purchase. Situation is so bad that in Mumbai suburbs brokers have sold houses on negotiated prices. The developers are in fix with deals coming down to 10% from 20%.
The pressure is mounting on the developers, as the buyers are now skeptical
of making new purchase. These sluggish sales, fall in potent buyer, and longer stay of property in market advocates to low market. Many transactions have come to stand still. The banks are adhered to their new market rates and the buyers are waiting for rates to stumble.
Published: February 14, 2008   
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