High interest rates result in price corrections for property in India

Prices of property in some of
India’s leading markets have fallen by up to 15 per cent in the last month,
partly due to higher interest rates in the country.

With homebuyers delaying the
purchase of a property thanks to the increased cost of borrowing, prices are
expected to fall further in the next few months meaning there could well be
property bargains to be snapped up in India.

Rising interest rates and correction in prices responsible for falling
property values

The Wall Street Journal’s Livemint site reports that the prices of
residential homes in Punjab, Haryana and Chandigarh have fallen by up to 15 per
cent in the last couple of months.

PC Srivastva, joint general
manager of housing company HDFC, said: “The buying of residential property
activity in Chandigarh and areas like Zirakpur in Punjab has taken a hit due to
lending rates…the rates of property has come down in the range of 10 to 15 per
cent.”

Mr Srivastva also believes that
property prices will fall by another 5 per cent in the next few months due to
fewer buyers in the market.

Mortgage rates in India have
risen by over 2 per cent in the last twelve months because of the tight
monetary policy of the Reserve Bank of India.

Kamaljit Singh Panchhi from the
Chandigarh Property Consultants Association said: “The buying activity has been
affected adversely in Chandigarh due to rising interest rate of home loan which
has put a huge burden on buyers.”

Another main reason for the
decline in house prices is that values had risen sharply over the last few
months and experts believed a correction was overdue.  Kulwant Singh, managing director of Janta Land Promoters,
said: “Property rates were ruling high by 30 to 40 per cent, which also
necessitated certain amount of correction in prices.”