Property prices may nosedive?

Here is a news item that appeared in ibnlive..

Is a correction in the property market around the corner? Yes, say experts who contend that property prices could fall as much as 20 per cent in the coming months.

"Property prices have reached their peak and they logically have to come down now as interest rates go up marginally. The prices may come down by nearly 20 pc in the next six months," says HDFC Chief, Deepak Parekh.

Voices in favour of property prices coming down across the country are growing as rising interest rates on home loans has created worries for many.

While industry players confirm that the demand for loans from high networth individuals has declined, they feel taking a home loan will still benefit an end user.

"If you look at people who are buying homes and getting tax benefits, even with an interest rate of 9 - 9.5 per cent, their post tax benefit comes to around 6 - 6.5 per cent. Compare it with the rental you have to pay, when you decide to live in a rented house, instead of buying one," ICICI Head (retail assets group) Rajiv Sabharwal says.

"Living in a rented house means you are also losing the capital appreciation, which may come even at an interest the rate of 10 -15 per cent per annum. Even at such high interest rate, buying an own home goes in the favor of customers, rather than renting one," he adds.

The demand for property has remained buoyant as the volume of property transactions have taken a beating in the past two months due to prices escalating beyond reach.

Consultants believe that builders will now have to readjust the steep prices they were quoting a year to six months back.

"I would say we are soon entering a buyers' market. The buyer will decide the volume of transactions - he will not over stretch his budget and he is not going to be desperate to clinch a deal where prices were going up every week," Chairman, Knight Frank India Pranay Vakil says.

Experts say with the interest rates still working favourably for the end user and speculative interest in real estate slowing down, actual users may soon start calling the shots in the property market.