It has become well nigh impossible for those who invested in real estate last year to exit the scene as the downturn has deepened and the prices being quoted do not even cover the purchase costs and interest expenses.
Moreover, the negative global news flow has set off a panic reaction, inducing investors to close deals at losses.
The 35-year-old Rahul Verma, who works with a Noida-based IT company, exemplifies the experiences of late entrants into the property market. He bought a Rs 50-lakh flat in Greater Noida early last year by arranging for a bank loan to finance 85% of the cost.
His EMIs have continuously gone up since the purchase, thanks to a series of rate hikes by the RBI. The flat purchase was a pure investment decision. Rahul had jumped onto the bandwagon after hearing stories of skyrocketing returns made on property investments.
However, the prices haven’t climbed as expected and the interest outgo has made the property expensive. Rahul is now left with the only option of selling at a loss. And given the global economic gloom, he is willing to take a hit.
“Several investors are stuck simply because there hasn’t been enough price appreciation in the past one year,” says Raheja Developers Chairman Navin Raheja.
Several young investors invested in property at the peak of the property cycle last year. Many purchased two apartments simultaneously, assuming that they would finance one by selling off the other at a premium. They are now caught in a difficult situation as they bought at a higher market rate and are compelled to service two EMIs.
Some investors have started defaulting, according to a senior Parsvnath executive. “There is a significant rise in the number of people who are approaching us to cancel their bookings and return the money,” he says.
Property consultants feel that investors will have to bear huge losses if the markets do not improve during the festive season. Home buyers in the country are staying away due to the high interest rate regime and expectations of a correction following the realty crash worldwide.
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Good article on how ever increasing home loan rate can land you in trouble?
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