Tuesday, June 12, 2007

Govt may curb demand in real estate

Finally Mr Chidambaram wants to reign in the bubble, after the horse has bolted out of the barn. Excessive speculation has resulted in bubbles all over the country with land prices tripling and quadrupling in period of 18-24 months. Cheap loans caused the bubble in residential prices whereas black money is the primary cause of of the surge in land values. Without enforcing strict land revenue and Income-Tax laws black money will continue to funnel the unabated rise in land, thereby forcing apartment buyers to take up loans at these lofty prices.

New Delhi: The Government on Tuesday indicated it intended to curb demand in the “overheated” housing and real estate sectors.

"Intention is to constraint demand in those sectors where there are signs of what you call overheating and example of that could be real estate and housing. I think in these sectors there is reduction in demand," Finance Minister P Chidambaram told reporters.

India’s industrial output increased 13.6 percent in April compared to 9.9 percent in the same month last year, but the Government is concerned that the economy might be overheating.

The Associated Press reports Chidambaram has warned banks against too much lending in real estate, which experts believe is drawing large amounts of speculative money that could result in a property bubble.

Chidambaram, however, said he had no intention of reducing demand in other sectors. The impact of his statement was immediate on Dalal Street, where nearly all the real estate stocks lost value, notwithstanding a modest 48-point gain in the benchmark index.

All realty stocks gained on Monday when the DLF IPO opened for subscription on a strong note. Unitech, the biggest listed real estate firm, saw its shares plummeting by 3.4 per cent or Rs 17.45 to Rs 490.

Another leading realty developer Parsvnath dropped 1.73 per cent to Rs 312.35 on the Bombay Stock Exchange, while stocks like Ansal Properties, D S Kulkarni, Sobha Developers and Atlanta Ltd also fell sharply.

1 comment:

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