Real Estate in India has been stagnant for a while now. Builders are finding it difficult to find buyers. Many small time construction firms are offering freebies to lure in buyers. The speculative real estate investor has vanished from the scene.

Knight Frank India, a real estate consultant company, expects further correction in home prices if the current slowdown in residential property sales continues, Chairman Pranay Vakil said.

“(In) residential, there is a slowdown. The volumes of transactions are low and it is a precursor to prices going down. In a lot of speculative areas, prices have already gone down. If these things (trends) continue for another two to three months, it is very likely prices will come down for residential segment,” Vakil said, adding sales volumes traditionally drop in June.

His comments come at a time when there are concerns over a possible slowdown in demand for residential real estate due to high interest rates, oversupply, and funding issues.

Real estate developers such as Brigade Enterprises had said the company witnessed a 20 per cent slowdown in home unit demand in south India in January-March.

Media reports also suggested that prices in Mumbai, Bangalore, Pune, and National Capital Region have corrected 15-20 per cent in the first three months of this calendar year.

On commercial office space, Vakil said, rentals are likely to remain high for another six months to one year because of mismatch in demand and supply.

Valuations of land, mostly above 25 acres, are also likely to remain high since in India foreign direct investment in real estate is allowed only in greenfield land projects.

The prices in Real estate might have dipped a bit in the last quarter, but it still remains on the higher side. The end buyers are finding it increasingly difficult to arrange credit. Although the home loan limits have been recently hiked from Rs. 20 Lakh to 30 Lakh for home buyers but that still does not meet the needs of buyers.

The lenders are apprehensive after the subprime mortgage crisis in the US and Europe. The stricter norms by lending banks make it difficult to secure a loan. Things might get worse before they change for the better for real estate companies.

The recent global investment banking meltdown has made liquidity hard to come by. The worst affected has been the real estate sector as projects are languising because of the cash crunch and vanishing buyers.

The urbanisiation process in India will continue, though at a much slower pace, and demand for real estate will remain slack for another year or so. Untill the global financial uncertainity gets over there is not much hope for the real estate sector.