The demand for real estate in smaller cities and towns has plunged nearly 35 per cent in the first seven months of the current fiscal, as many realtors deferred their projects owing to higher borrowing costs.

The sharp decline in demand for property was witnessed in Tier II and Tier III cities including Pune, Chandigarh and Bhopal.

"Nearly 35 per cent fall in demand of purchase of properties in most of Tier II and Tier III cities has been noticed in the first half of current fiscal due to high cost of borrowings," industry body Assocham said on Wednesday in a report.

These cities had witnessed a 25 per cent surge in property demand in the first seven months of last fiscal year.

According to the report, more than two crore people in such cities are unable to buy property since higher borrowing costs have compelled most of the real estate developers to defer their projects.

The buyers of dwelling units have also not been able to make payments as higher interest rates and also still higher inflation have come on their ways to partly dampen their enthusiasm and eroded their budget, Assocham noted.

The report has been prepared on the responses from real estate firms based in tier II and tier III cities such as Meerut, Bulandsahar, Muradabad, Bhiwadi, Dehradun, Rudarpur, Chandigarh, Sonepat, Panipat, Manesar, Pune, Nasik, Bhopal and Indore.

"... not only the cost factor has compelled, the promoters of property makers to indefinitely defer their real estate projects but non-availability of inputs such as bricks, cement, steel and availability of quality power and delays in obtaining water connections have caused inordinate delays for developers to stick to their schedules," the report said.

Indore News, November 2008