Property rally in India not over, Mumbai at risk; house buyers fret

Aug 01 2012, 13:43 IST
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SummaryIndian house prices, which have more than doubled in the past five years, will keep rising.

Not good news for those who want to buy a house, this.

Indian house prices, which have more than doubled in the past five years, will keep rising this year even as the economy slows although prices in India's financial capital, Mumbai, look ripe for a fall, a poll showed on Tuesday.

The first such survey of 19 property market analysts, consultants, developers and data firms taken over the past few weeks pointed to a median 7.5 percent rise for house prices this year in Asia's third largest economy.

This comes despite a slowdown in home sales and a rapid deceleration in economic growth to 5.3 percent at the latest read, its weakest in nearly a decade, from a nearly 10 percent pace before the global financial crisis in 2008.

Yet the expectation for price rises in cities such as Mumbai coincides with some of the strongest conclusions ever in Reuters housing market polls worldwide that a property market is overvalued.

That includes polls taken before the historic U.S. housing market crash sent prices plummeting by more than a third and triggered the financial crisis.

There is no demand, there are no fundamentals to these prices, said Pankaj Kapoor, founder and managing director at Liases Foras, a real estate research firm in Mumbai.

(In Mumbai) sales have continuously been going down. It has 37 to 40 months of inventory lying in the market. No efficient market can maintain more than eight months of inventory.

But there appears to be little hope for prospective homebuyers in a market which analysts rate as too expensive in the urban centres of Delhi and Mumbai but that is still being driven by widespread expectations for hefty capital gains.

Paresh Patnaik, a man in his 40s, says that despite having a good paying job, he cannot really think of buying a house, even though his need is urgent and banks may not give him loans due to the age factor. He has a kid and a wife while his parents are in Orissa, but he sees no hope for himself, with renting the only option till even after retirement. Unless, he says, "A miracle happens and the land sharks and the politicos in Mumbai are disciplined and the price falls."

He could well be speaking for most of India, where the demand is huge, but the money is too tight to mention.

Developers, who had reaped profits off a booming market, say relatively high

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