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Still A Good Time To Buy A House, Say Experts,Prices To Go Up By 15-20% Over Next Six To 12 Months

By ugesh sarkar, Section Real Estate
Posted on Thu Jun 26, 2008 at 03:43:34 AM EST

You may have put off the decision to upgrade the flat television with a wall-mounted LCD TV. Or opted to wait for interest rates to soften before going in for a sedan against the small car you own now. But if it’s a house you have in mind, it’s best not to wait and watch. For, industry observers expect real estate prices to go up by 15-20% over the next six to 12 months.

Already reeling under the impact of rising input costs (steel and

cement prices have doubled in the past 12 months and transportation cost has further increased input costs by 10%) that have squeezed the margins, realtors say they will hold on to the current prices for two-six months before going in for a modest hike.

“Construction cost has shot up by 50% over the past year but property prices have risen by 15-20% only. We have been able to absorb most of the impact because of the 100-200% hike in land prices seen in the past couple of years,” said Pradeep Chopra, director of realty firm PS group.

Though the cushion still exists, the impact of inflation has worn it thin. If the developers have not gone in for a hike in the past six months, it is primarily because of a slowdown in sales. “There’s no point denying that sales are down 30%. Interest rate hike has put off prospective buyers,” Chopra said.

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Sureka group chief Pradeep Sureka, who heads the Bengal chapter of realty forum Confederation of Real Estate Developers’ Association of India (CREDAI), said realtors would hike prices by 15-20%. “At present, margins are quite thin. Builders will sustain the current prices as long as possible to tide over the slump. But no one will sell at a loss. Hence, price will go up in three-six months,” he said.

Even in this situation, Sureka reckons a drop in prices. “Right now, land prices are unrealistic. If they were to come down to a rational level, property prices may also be lower,” he said.

Three years ago, a cottah of land in Garia sold for Rs 1 lakh. Now, it’s Rs 5 lakh. In Tollygunge, it has shot up from Rs 7 lakh to Rs 20 lakh. In upmarket Ballygunge, the hike is from Rs 20 lakh a cottah to a whopping Rs 1 crore.

In contrast, price of apartments in Ballygunge has gone up from Rs 4,000 per sq ft to Rs 10,000 in this period. And in Garia, from Rs 1,000 to Rs 2,000 per sq ft while that of Tollygunge from Rs 1,800 to Rs 3,000 per sq ft.

“Of course we will have to hike prices. But it will be modest because it is the middle class buyers who will get hurt the most. We are calling for special residential zones on the lines of special economic zones where government should extend incentives like waiver of sanction fee and duty relief for mass lower-income group and middle-income group housing,” Merlin group chief and South City Projects director Sushil Mohta said.

Source: Source: Subhro Niyogi From TNN 26/Jun/08

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