MUMBAI: The correction in the stock market is likely to affect property prices marginally. Industry experts believe stock markets investors may sell their real estate holdings to compensate for the loss in the shares.
Anuj Puri, chairman and country head, Jones Lang La Salle Meghraj (JLLM) explains: “There is marginal relation between the two asset classes. Small investors who have property and shares both in their portfolio may sell real estate to support the loss due to the correction.” But he also says that bigger investors who can absorb the loss for a longer duration (till market bounces back) will hold on to their real estate.
More selling will evidently result in more property transactions. But the prices will fall a tad as investors would look for exiting their holdings as soon as possible.
“This will bring more sanity in the real estate markets,” predicted Pranay Vakil, chairman, Knight Frank, an international property consultant. He continues, “Investors wanting to sell property were revising the price every week. Such events lead individuals to think more realistically. Those wanting to book profits will sell at sensible prices.”
There is a reason behind these views from the experts. In just 13 days the Bombay Stock Exchange’s 30-shares index, Sensex, has witnessed a correction of 16%. Going forward, market experts feel “there is more pain moving ahead”. Sceptics predict the index to dip at between 25% and 30% from the current levels.
What will lead to marginal dip in property prices is the “lag effect”, said Hardeep Dayal, managing director (realty division) of Centrum Broking. “The real estate market is already witnessing correction in the country, except for a select few areas. Hence stock market investors, who sell company shares, will be sceptical about investing in property.”
Dayal also believes that though transactions will rise, this will be accompanied by “reasonable and realistic” prices.
