India sees third-highest rise in housing prices

Most developers in India raised prices in 2011-12, owing to a rise in construction costs

The Global House Price Index recorded its weakest annual performance since the recession in 2009, as doubts over the future of the euro zone, along with Asian governments’ staunch efforts to cool markets and deter speculative investment, took a toll, the report stated.

Typically, high interest rates dampen housing demand. However, the rise in prices in India was despite the prevailing high interest rates. R R Singh, director-general, National Real Estate Development Council, said, “Though demand fell a little, it was good enough for developers to raise prices.”

Most developers in India raised prices in 2011-12, owing to a rise in construction costs, despite a correction in demand, even as the Reserve Bank of India cut rates 13 times between March 2010 and October 2011. “Prices came down after 2008, but have risen since then,” Singh added.

A few developers also included the cost escalation clause in their buyer-builder agreement, and, therefore, could pass on the increased input costs to buyers. This is set to result in an additional rise in prices.

China recorded 2.2 per cent contraction in house prices in the year ended December 2011, the report stated. “The Chinese housing market saw a tough year, as developers and purchasers alike have had bank finance squeezed due to cooling measures”, said Nicholas Holt, director of research, Knight Frank. In the Asia-Pacific, lending restrictions, new taxes, curbs on multiple property purchases and new regulations to restrict inward flow of hot foreign money had the desired effect, he added.

Asia had seen average annual price growth of about 16 per cent in the first quarter of 2010. However, two years later, it stood at about two per cent, according to the report. Though the region’s growth still exceeds the global average, margins have shrunk considerably.

On an average, house prices in Europe remained flat in 2011-12, as rising unemployment and depleted incomes weakened housing demand.

The Knight Frank Global House Price Index, started in 2006, tracks mainstream residential markets across the world and is compiled on a quarterly basis using official government statistics or central bank data.

Source:business-standard.com