INSUBCONTINENT EXCLUSIVE:
House prices rose at an average annual rate of 8.5 per cent last year.House prices will rise at half the rate of consumer price inflation
next year, hit by dwindling credit supply, according to a Reuters poll of housing market experts who said Delhi, the national capital, will
be hit hardest.House prices have risen at almost double-digit rates for over a decade in a country of 130 crore people, where for many,
owning a home is still a dream
Major cities have become some of the most densely populated in the world.Asia's third-largest economy is also grappling with a liquidity
crunch after a large lending firm, Infrastructure Leasing and Financial Services (ILFS), defaulted on a short-term debt payment in June.The
Reserve Bank of India (RBI) and the government have since tussled over tight liquidity
The government has blamed the central bank and has asked it to ease lending regulations for banks and financial firms.Rising bad debts and
non-performing assets have made major banks and other large financial institutions cautious on lending, leading to a slowdown in the
property market, which relies heavily on borrowing for both home building and buying."The liquidity crunch is likely to continue in 2019 and
push (house) price growth to an all-time low
It will also lead to a scarcity in funds, pushing home loan interest rates higher," said Anuj Puri, chairman of ANAROCK property
consultants."And thus, NBFCs (non-banking financial companies) and other commercial banks will be alert over further loan disbursements
until normalcy returns to the market
This has created a deep-rooted problem
Only the fittest can survive," he said.Puri also added the lack of credit "will be worse" for the housing market and smaller real-estate
firms than the impact from the high-value currency ban two years ago and the hasty implementation of a goods and services tax last
year.House prices rose at an average annual rate of 8.5 per cent last year, according to Reuters calculations based on the RBI's NHB Residex
they expected national house prices to rise 2.8 per cent this year and 2.0 per cent next, around half the rate of the current and expected
rate of consumer price inflation.While the consensus is based on different measures, a majority in the poll provided their forecasts based
The common theme across forecasts irrespective of the methodology clearly shows a sluggish pace of house price growth over the next year.If
the prediction for house price growth for this year is realised, it will be the lowest in at least a decade and likely the first time since
the financial crisis house price growth has not outpaced inflation.A regional breakdown shows a much worse picture for Delhi.House prices in
Delhi, including the National Capital Region, home to 2 crore people, are forecast to fall 2.0 per cent this year and 2.5 per cent
Fifty-five per cent of properties built in the last decade were in unattractive locations, which simply had no takers," said Pankaj Kapoor,
managing director of realty consultancy Liases Foras."Apart from that, the increasing pollution really suggests doom for the market in Delhi
Water scarcity, pollution and floods are major factors which will impact prices and valuations over the coming years."Property prices in
Mumbai, country's financial capital, were expected to stagnate this year and next
For Bengaluru and Chennai, the median forecast was for house prices to gain between 1 per cent and a little over 2 per cent in the next
year.High prices are deterring new buyers across most cities, on top of rising interest rates and an economy that is now cooling.When asked
to rate the real estate market nationally, 11 of 14 analysts said it was "overvalued" relative to economic fundamentals.Delhi and Mumbai
were either "overvalued" or "extremely overvalued", according to a majority of respondents
But 10 of 13 analysts said homes in Bengaluru and Chennai were "fairly priced"."Most markets, except Bengaluru, have seen a pronounced fall
in demand due to lower affordability," said Arvind Nandan, executive director of research at Knight Frank India.
