STOCK MARKET DESK

Academically, there is a direct correlation between stock market crash and property prices crash. Normally there is a time lag of approximately six months to one year between stock market crash and property prices crash. Whenever the stock markets have been passing through boom times, demand for and prices of property have gone high. Likewise, in depressed Stock markets, the property prices tend to soften. The reason for the relation between the two markets is that in rising market, the huge gains find real estate as the ideal place for parking funds leading to escalation in prices and in a falling market disposal of property is the quickest way to cover losses leading to a fall in property prices.

People who have lost heavily in stock markets are keen to dispose off their investments in the real estate market. Distress selling always depresses prices. Small builders facing financial shortage have to sell some of their property to meet financial requirements. Many other individual investors, who have purchased multiple properties with their own funds or loans for speculative purposes, now have to sell some of their property before prices go down further. Reports from Mumbai, Delhi, Bangalore, Ahmedabad and Coimbatore clearly indicate that property prices (specifically residential property) have dropped 10 to 15 percent in prices. Fresh buying has come to a screeching halt in all major cities. The stock market correction could result in real estate prices coming down by 15-20 percent over the next 3 to 6 months. If the demand does not improve prices would start moving down and It would not be a surprise if the prices drop by up to 30 to 40 percent in near future.