Property prices set to rise

Property prices set to rise
The Hindu Business Line, June 18, 2009, Page 1

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“There is no reason for builders to lower prices now as liquidity has improved”. - Mr R.R. Nair,CEO, LIC Housing Fin

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N. K Kurup ! Remya Nair, Mumbai

Property prices in India which have been on the decline for several months on account of the credit crunch, are set to rise, according to Mr R.R. Nair, Director and Chief Executive, LIC Housing Finance Ltd.

“People cannot expect a further fall in property prices. That stage is over. Builders had lowered prices when they were in trouble in the last few months. For builders, the liquidity position has eased and the cash flows have improved. They have also cleared off existing inventories. Therefore, there is no reason for them to lower prices,” he said.

As the demand picks up, property prices will go up. This could happen in the next five-six months, Mr Nair, head of the second largest housing finance company in India, said.

“By how much the price will increase, will depend on the builders. In some pockets, they have started quietly increasing prices. However, it has not happened universally,” Mr Nair said in an interview to Business Line.

Moreover, builders had not increased prices in the last 15-18 months. Because of all this, there is a “good possibility’ that property prices will rise, he said.

Citing reasons for renewed housing demand, Mr Nair said that with a stable government in place, people feel that the economy will improve, the liquidity situation would be better and the soft interest regime will continue. They also feel that property prices have bottomed out. This is precisely why there is a renewed interest in buying homes, he said.

The property prices had seen a correction in the last two quarters as demand for housing had dried up. Builders had been forced to lower prices as they were sitting on a large inventory. Some builders who had planned luxury projects had converted to standard projects.

“With the economy looking up, there is confidence among builders that they can raise funds either through loans or through equity or QIPs. That is why builders have regained enthusiasm and started working on the projects”, he said.

Growth pick-up

The housing finance company has seen growth pick up from end- February. In March, the company had a 42-per cent growth. For April and May put together, there was a 120 per cent growth in approvals and a 50 per cent growth in disbursements.

Most of the growth for LIC Housing Finance has come from retail finance, Mr Nair said.

The company has revised its business growth target upward from the 25 per cent it set for itself at the beginning of this fiscal.

“With the first two months of this fiscal registering a 50-per cent growth in disbursements, the growth should be in the range of 30-40 per cent this fiscal”, Mr Nair said.