In recent months, real estate prices have shown an increase in 16 out of 26 cities covered by the country’s most authoritative residential housing price index, suggesting that prices may be finally bottoming out.
Prices in Delhi and Bangalore rose during the quarter ended December 2013. In Mumbai, prices stopped falling for the first time since March 2013.
The Residex, an index released every quarter by the National Housing Bank (NHB) with technical support from RBI, has shown a sharp swing away from the trend earlier this year. In the first quarter of FY 14, residential real estate prices fell in 22 cities out of
26 in the list, a performance which improved to 10 cities in the following quarter, and finally to eight in Q3.
Prices were flat in two cities in the third quarter. In Q2, prices were flat in four cities; rose in 12.
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In Bangalore and Pune, prices have risen for the first time since the last quarter of FY 13, the latest Residex data shows. The biggest rise was in Nagpur (8 per cent over the previous quarter), followed by Guwahati (7.4 per cent) and Pune (7.3 per cent).
Residential prices in Delhi rose 3.2 per cent over Q2, while those in Chennai and Bangalore rose 3.8 per cent and 3.7 per cent respectively. Patna has seen a significant increase of 6 per cent in prices.
Major cities where prices continue to fall are Lucknow (by 3.1 per cent from Q2), Jaipur (2.8 per cent), Chandigarh (2.1 per cent) and Kolkata (1.5 per cent).
The trend is significant because home prices are rising even though interest rates have not fallen. In the third quarter monetary policy released in January, Governor Raghuram Rajan raised benchmark interest rates by 25 basis points to 8 per cent.
R V Verma, the chairman of NHB, which also acts as a quasi-regulator for the sector, said there were clear signs of a change in the trend of persistent decline. “There is a strong demand from end-users. They are not willing to stay on the sidelines now,” he said.