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Why are real estate prices not falling much? The answer, they'll tell you, is that costs are so much or that anyhow circle rates are this much and prices can't fall below. But really, the answer is more complex.
A big factor is that current owners and buyers don't want prices to fall. Imagine an under-construction project when you've paid Rs. 8000 per sft, and the builder cuts it to Rs. 6,000 to just get it out of his system. You'll protest and demand that your price be cut too.
That is simply unsustainable. If you've agreed to pay Rs. 8,000 then further price cuts are not automatically yours, but people will withhold further payments in the hope they can negotiate. This screws up things for everyone.
And then, there are the flippers. If the builder cuts rates, they can't sell their flats which they intended to after some time, and the builders have depended on such people to build offtake in many projects so there is some gratefulness and relationship to deal with.
The government doesn't like lower revenue either, so it will not allow registrations too far lower from circle rates, though they now allow 10% lower prices. And circle rates will not correct down either: imagine a government official responsible for bringing revenue down!
Brokers don't also like it - but they play a part in silent "distress" deals. Let the builder keep high prices, but do a side-deal negotiation at a much lower price for a few people. This is not good for business as distress is not scalable. But at least something.
In general, the only people who want lower prices are those that want to buy and live in a house. And even those people don't want continuously falling prices after they buy.
The same philosophy doesn't apply to cars. Houses are a more prized asset.
The same philosophy doesn't apply to cars. Houses are a more prized asset.
Which all comes to only one thing: RE Prices crash only in a deep crisis; when these considerations are thrown to the wind because cash is needed desperately by a few people, which then cascades into a lot of people selling to beat the rush.
Real estate is much more about behaviour than it is about pure supply and demand. Perhaps there is enough distress now, perhaps there is not. We will only know if RE prices actually crash.
