Experts believe correction is around the corner in real estate sector

Ahmedabad: Though tales of record deals and mega investments have become commonplace in the real-estate sector, there is a murmur about property markets cooling off. Experts dealing in the real-estate sector predict that prices could tumble down in peripheral areas of cities like Mumbai, Delhi, Kolkata , Hyderabad , Pune and Ahmedabad by as much as 10-15%.
This process of correction, however, will not be as intense as the one witnessed in 2008-09. Prices are expected to dip gradually in the initial months of 2011 and last for several months. The impact is already evident in some of the smaller realty markets in Tier-II cities like Ahmedabad, where a couple of builders have reduced the prices of luxury homes.
Given that there will be an abundance of supply coming to the markets in 2011-2012, there could be a decrease in prices due to over-supply. Burgeoning areas (of cities) will see minor corrections as more and more supplies pour in. However, it is also believed that correction will not happen immediately and will not touch matured locations.
A recent pan-India research done by a Gujarat-based marketing strategy and consulting firm points out that the Indian real estate industry is in for some correction in 2011. According to it, a majority of real estate investors from Delhi, Mumbai, Bangalore, Chennai, Kolkata, Hyderabad, Gurgaon, Chandigarh and Pune are now not willing to invest at the existing price points. Majority of these investors are keen to exit and book profits on their earlier investment.
The percentage of investors in real estate projects in cities like Ahmedabad, Kolkata, Pune and Mumbai had already reached over an unhealthy 50-60% from an ideal 30% (with the rest 70% being actual end-users). Secondly, the rise of residential prices which shot up by 30-40% within the last one year has also given rise to fears of formation of a bubble in the market.
In some residential micro-markets of Mumbai, prices have surpassed the 2008 peak levels and this coincides with a large quantum of supply. Particularly in the luxury segment, if the speed of sales reduces, then the probability of a correction in prices cannot be ruled out.
Even the realtors themselves, foresee a correction.

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