Registrations of property sales have hit a 31-month low in this city due to high realty prices and mortgage rates, says a study.
Registrations for November are down 20 per cent over a year, to 4,060 units, and down 12 per cent month on month, says a report by equity brokerage Prabhudas Lilladher (PL).
Saying the Reserve Bank of India’s policy on pausing and easing of rates is positive for the sector, the report says the onus is on developers to cut prices to push sales. “If the status quo on pricing is maintained, things could get worse for the sector before getting better. Thus, we believe action on pricing by developers is needed to revive the sector’s fortunes,” said Kejal Mehta and Dhrushil Jhaveri, analysts at PL.
“Mumbai island city continued to maintain its quarterly average of 2,000 units of sales. We believe the city will struggle to maintain a similar run-rate from the first quarter of calender year 2012 if prices do not drop by then,” said Bank of America Merrill Lynch analysts Abhishek Kiran Gupta and Gagan Agarwal in a recent report.
After raising rates 13 times since March 2010 to curb inflation, RBI chose to keep rates unchanged in its review last week. “In terms of monetary policy,” Mehta and Jhaveri said, “RBI has indicated that a reversal is on the cards as soon as the expected drop in inflation materialises over the next few months. Although resumption of easing would be a definite positive for the sector, the benefits would come with a lag.”
However, property developers say it is difficult to cut prices, since inputs costs are still high. “All the key costs such as manpower, raw materials and borrowing costs have gone up sharply,” said Lalit Kumar Jain, president, Confederation of Real Estate Developers Associations of India. “When there is a humongous increase in costs, it does not make sense to sell below cost. More, it is a question of individual choice to reduce prices.”
