Mumbai developers may cut record- high home prices to revive flagging sales after banks curbed credit to the sector, according to IIFL Ltd.
Registrations for home sales, leases and property transfers fell 15 percent this quarter from the three months ended Sept. 30, the brokerage said in a note yesterday. “Selective price cuts” are expected in the quarter ending March, it said.
Real estate companies face rising borrowing costs and shrinking access to credit after a corruption probe into loans to some developers, according to Bank of America Corp.’s Merrill Lynch unit and Ambit Capital Pvt. Lenders may cut back on funds to the real estate industry for the next three to six months, Merrill Lynch said in a note to clients on Dec. 1.
“Fresh lending to real estate developers by state-run banks is taking longer than in the past,” Bhaskar Chakraborty and Avi Mehta, Mumbai-based analysts at IIFL, said in the note. “We see developers with debt refinancing requirement in the second half of the fiscal year ending 2011 increasingly coming under pressure to cut prices to monetize inventory.”
Property prices in Mumbai have climbed between 15 percent and 25 percent since April to all-time high levels, according to IIFL, ranked India’s third-best domestic brokerage in an Asiamoney poll this year.
The increase in home prices affected affordability and in turn sales volumes in a quarter that’s seasonally the strongest for real estate sales because of the holiday season, it said.
Registration data is a lagging indicator of demand as properties are registered two to three months after the actual purchase.
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