Property developers have slowed new project launches and are sitting on large land banks to retain pricing power.This has aided them in increasing home unit prices, though housing demand has started moderating because of high interest rates and rising real estate prices.
In the July-September period, property prices in most cities rose, albeit at a slow pace. The transaction volumes also improved on a sequential basis, but remained lower than a year ago.
"Property markets are facing moderation in demand, but price correction has not occurred, as real estate firms are holding land banks and slowing new launches to retain pricing power," the Reserve Bank of India said in its third quarter review of macro-economic and monetary developments released on Monday.
According to the central bank's quarterly housing price index, which is based on data on property transactions in nine cities,
home unit prices increased sequentially across all cities, except Bangalore, in the second quarter of the current financial year.
The transaction volumes during this period were also higher on a quarter-on-quarter basis for most cities, except Mumbai, Kanpur, and Jaipur.
While banks' overall credit offtake decelerated, home loans expanded at a faster pace in July-September than that seen a year ago.
"Higher housing loans, coupled with price rigidities in the housing market, reflect the continued pricing power with developers, as also the increasingly stretched balance sheets of residential buyers," RBI said.
The banking regulator said interest rates remained firm in the third quarter, following a rise in the policy rate in October, owing to large government borrowings, tight liquidity and deregulation in some rates.
Most banks increased the interest rate on deposit accounts after RBI deregulated rates on savings deposits and non-resident deposits.
