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Prices in India Still Rising, but Experts Not Worried

By Allison Halliday | May 21, 2012

The real estate market in India is pretty lively at the moment, and worries have been raised over the prospect of a property bubble. Although prices are higher, demand has actually fallen in six major cities, and Indian buyers are increasingly choosing to wait and see what happens.

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They are anticipating property prices will fall, as well as interest rates, and demand in these major cities has dropped by a massive 40% during the last 12 months, while new project launches have seen demand fall by nearly 50%. In spite of this decline in demand developers haven't yet had to cut their prices.

Over the last few years property prices have risen considerably, and this has largely been due to speculators who have been buying up large blocks of flats currently under construction in up-and-coming neighborhoods. After these kinds of purchases, developers often raise prices to help these investors realize profit.

In fact developers have a number of tactics designed to generate demand for projects, and will frequently put up signs saying the project has been sold out within just a few weeks of its launch. In the meantime brokers for the developer will actively resell these properties. In general it takes around three years for a project to be completely sold out. However the developer tactics are not the only reason for rising property prices, as it now costs more money to build due to increased cost of construction and land prices.

There is still a shortage of affordable and mid-range priced residential property, and analysts don't think there is any real prospect of a property price bubble forming in the Indian real estate market.

However they are concerned about the risk due to speculation. They think some of the prices of new property in locations lacking in infrastructure could decline in the next few months by between 5% and 10%, especially in locations where speculators have been particularly active.

In spite of this most agree it's a good time to buy property provided you intend to hold onto it for more than three years.

Allison Halliday is a Realty Biz News contributing writer. She handles International Real Estate and is a seasoned blogger.
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