The real estate market in Delhi is in serious danger of collapsing in the next few months, according to experts.
The Reserve Bank of India (RBI) has warned that the property market could plunge in the second half of this fiscal as well as the next, due to the demonetisation process and the impact of GST.
In a note to banks, the RBI said the market could crash if prices remain low.
The impact of the demonets is likely to push up prices, which are already under pressure as most buyers have already booked a cancellation clause in their transactions.
“We have forecast a 10 per cent drop in sales and a 10 to 15 per cent fall in buyers in the month of March,” said Nirmal Bhattacharya, an economist with Mumbai-based Nomura Securities.
“It could push the price down to as low as Rs 5 lakh, as it has been priced too low in the past.”
The impact will be felt in the coming months as the supply of property in Delhi, the capital of India, is already at its limit.
It is highly unlikely that buyers will be able to buy at the current level.
“If the current trends continue, the real estate will face a sharp fall in the year ahead.””
This is an alarming situation as the average house price in the country has increased by nearly 25 per cent in the last 10 years,” said Shailesh Kumar, an executive at the Centre for Business Research and Development.
“If the current trends continue, the real estate will face a sharp fall in the year ahead.”
The RBI said in a note on Wednesday that the government is preparing to enact GST on April 1, which will result in a significant impact on the property industry.
“However, given the uncertainty about the impact the demonits will have on the sector, we are advising banks to take steps to avoid any such impact on their operations,” the note said.
“As such, we recommend them to review their real estate transactions and review the viability of the real property sector.”