MUMBAI: Rising affordability concerns and a sluggish job market continued to push home prices downwards, according to a report released by Nomura. At all-India level house price inflation continued to moderate at a fast pace and eased to its lowest recorded level of 5.2% in Q1 2016, as per the Reserve Bank of India's housing price index (HPI). House price inflation was recorded at 9.8% in Q4 2015.
"Given affordability concerns, we believe risks to house prices remain skewed to the downside," Nomura said in its report. According to Nomura, end-user demand was largely curtailed by elevated home prices and weak job growth that log jammed any possible sales in the real estate sector. In metro cities governments efforts to limit circulation of black money also dulled investor demand.
The Japanese financial services major also pointed out that while banks were aggressively pushing to grow their retail book by offering lower rates, affordability concerns would ensure real estate demand remains subdued.
"Even as lower interest rates and an aggressive retail lending push by banks should act as tailwinds, we believe affordability concerns will dominate; this suggests that risks to house prices remain skewed to the downside," Nomura said.
As per RBI's house price index moderation in real estate prices was fairly broad based. Of the 10 cities tracked by the HPI, four cities experienced an outright yearon-year decline in prices, up from only one in Q4.
The House Price Index, that measures price levels across the nation also showed that while real estate prices continued to moderate in both metro and non-metro areas, prices in non-metro areas was falling faster.