Prices of properties may rise over 12 per cent from its present levels by the end of this year due to the rising costs of inputs like cement and steel, service tax levied on real estate industry and high cost of funds.
While cement prices have risen by Rs 20 per bag, steel prices have also increased by around Rs 1,000 per tonne in recent times on the back of excise duty hike on the commodity.
Further, budgetary provisions of levying a 10 per cent service tax on purchase of apartments or commercial property and with possibility of hardening of lending rates by banks will add to this price rise.
“There is a strong possibility of price hike as factors like service tax, rise of input prices will be passed on to the end users,” Raj Menda said on the sidelines of announcement of dates for CREDAI- Karnataka Realty Expo here.
Inflationary pressure on the real estate industry will prompt such decision, he said.
Confederation of Real Estate Developers Association of India (CREDAI) — Karnataka, which is holding Realty Expo 2010 on 3rd and 4th of April, however, expects a good response from consumers due to reviving demand.
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“There is a reasonable demand for properties as of now and it is growing at an arithmetic rate,” Menda said.
The demand for residential properties is good and on the back of revival in IT industry and salary hike for most employees, this is set to grow, he said.
As 41 developers featuring 220 projects and over 15, 000 apartments and 3,000 villas will participate in the event, it will give consumers a wide variety of choices, he said.
The real estate sector has been badly hit by the recession due to the falling demand and repayment pressures.
However, the sector is now looking up with some tangible signs of economic revival.
“There is roughly 6 per cent of the unsold properties lying with real estate developers as of now. In commercial property, there is an oversupply which is expected to be absorbed in the next two years,” he said.
In affordable housing segment, Menda said there were six developers showcasing affordable housing in the expo. Realty Expo, arranged by CREDAI, will also see participation of three new housing finance companies like ICICI Bank, Deutsche Bank and Reliance Home Finance this year.
“Banks are cautious about providing housing loan to consumers and asking for higher collaterals for lending to real estate developers,” he said.