India’s property market is in a downturn. After nearly four years of a real estate boom, prices have dropped 20-40% since their peak, property sales have fallen over 50% year-on-year (y-o-y), and developers are burdened with many unsold and unfinished projects. The economic recession has taken hold, and bank lending has tightened.
Many projects have been stalled by their inability to raise finance. Office rents have fallen, especially in Mumbai and New Delhi, where they have declined considerably since their peak. There are many office projects in the pipeline, and this will exert further downward pressure on rents in the near term. Further, due to the economic downturn, some major companies may relocate to less expensive office space, or renegotiate existing leases to drive down rents. In the residential market, prices are falling.
Potential buyers are delaying purchases in the hope that prices will go down further. First-home buyers are seen as a major driver for the residential segment. Luxury residential prices fell dramatically in early 2009. Demand is sharply down. Affordability is now one of the main drivers in the residential market. There has been resurgent interest by developers in affordable housing schemes, especially as the market has stalled for luxury houses and apartments.
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