The real estate market in India was severely hit in 2008-09, following the global economic meltdown, high interest rates and negative sentiment prevailing in the market. To improve on the waning demand for property, the realty sector in India witnessed a significant price correction for both new and existing projects, thereby propelling property sales in the initial months of 2009-10.

At present, the basic selling price in Gurgaon is between Rs 3,500 and Rs 4,500 per square feet (sq ft), as against Rs 4,000 and Rs 8,000 per sq ft around 7-8 months ago. In Noida, properties are available within a price range of Rs 2,500-Rs 3,200 per sq ft, while the range is between Rs 1,500 and Rs 3,000 per sq ft in Faridabad.

“After some difficult quarters, this correction in property prices, coupled with lower interest rates is gradually bringing realty sales back on track,” opines Rajender Bhati, General Manager of Modern Buildtech Private Limited, a mid-sized real estate company in Faridabad.



Factors driving property price corrections

There has been a significant price correction in the country’s real estate sector (especially in the National Capital Region), due to the following factors:

Global economic recession: This is the main factor that contributed largely to the correction in property prices. The global financial crisis and unabated rise in the Indian inflation index led to a significant increase in property prices, thereby leading to a decline in realty sales in the country. In terms of office realty sales, recession prompted the corporate houses to postpone their business expansion plans, resulting in few transactions.

Increase in land supply: Following the revision of the real estate master plan, there has been an increase in land supply (especially in Gurgaon and Faridabad) with the addition of more residential sectors and approval of licences for new projects. This prompted the developers to lower their prices in a tight economic condition.

Rise in FAR: Currently, the floor area ratio (FAR) has been increased to 2.75 from 1.75. This increase in FAR led to price competitiveness in the realty market as it brought in more supply to the market and created room for affordable housing segment.

“Given the challenging times, correction in property prices will definitely benefit the common man,” says Ankit Shah, Director of Vishnu Properties, a mid-sized real estate company in Ahmedabad.

Going forward, confidence in the industry, increasing purchasing power, attractive rates and aggressive ventures into the affordable housing segment by most developers will escalate realty sales in the country.

Jeeta Bandopadhyay