Realty prices will crash further, says Ambit

Real estate volumes have come down 10 -15% for three consecutive years

Real estate prices will crash further after seeing a fall of 7 to 18% in big cities in April this year, says a new report.

A recent report by Ambit Capital said that some prime parts of cities such as Delhi have already steep price correction at 20-25% and smaller cities such as jaipur, Rajkot and Lucknow have seen a 15 to 20% correction on a yearly basis.

The report said real estate volumes have come down 10 -15% for the three consecutive years and new launches have come down 40 to 80% on a pan Indian level.

“We are seeing a broad-based real estate pullback, with prices correcting in most tier-1 and tier-2 cities alongside sharp drops in transaction and new launch volumes,” said Saurabh Mukherjea and Sumit Shekhar of Ambit Capital in a recent report.



“The drivers for this slowdown are a mix of supply-side factors (banks have pulled back lending to developers) and demand-side factors (the Black Money Bill has created fear amongst speculators),” they said.

The report said real estate inventory is at its peak in Delhi, Gurgaon and Noida. In NCR, it would take 14 to 16 quarters to sell the inventory, it said. “The situation in Tier 1 and Tier 2 cities is similar,” it said.

 

“Whilst stated prices remain elevated, transaction prices have already fallen by 10-15%, and real estate brokers are saying that a further correction is a must for inventory liquidation,” it said.

“Discounts have increased significantly in the secondary transactions market and distressed real estate liquidation by lenders (who have not been repaid by developers) is becoming increasingly common,” it said.