REALTY FEELS SLOWDOWN PINCH

The condition of realty market is getting worse day by day, as the slowdown, inflation and interest rates have harmed the real estate industry. If the condition remains the same then the developers can show their talent in front of the home buyers in Mumbai as the property prices are getting high there.

The condition of real estate industry is worsening per day because of which the sales of residential and commercial economic resource hit a slowdown resulting in unsold inventories. Developers all the investment in their project is flooded away because of the economic disturbances in the realty market.

Only some of the projects are sold and the rest of the inventory is still unsold. If the developer cut the cost of their unsold units then it will be a big loss for them. Still they are filled with a hope that the price will rise, so they are not cutting down their price.

All this piled pressure on developers to cut prices. “There’s an undercurrent to cut prices to push sales. Developers are short of cash. But this isn’t yet visible on the ground,” CB Richard Ellis MD Anshuman Magazine explains. There’s a demand for residential property. But, other than the poor sentiments, sky-high prices are slowing sales.

Builders are putting up a brave face and saying there’s no scope of a major price slash yet. “Input costs have skyrocketed in the last year and we work on low margins,” Vineet Gupta, ED, Ajanara group, says. If prices have to be shaved, there’ll be no new launches, which will affect supply and in the long term, because demand is perennial, rates will rise. Ultimately, realtors won’t be able to build by cutting losses.

Maximum City Sees No Big Price Cuts Soon

In the last few years, a sudden strong change in the growth of realty as the developers has few left with few takers. The Mumbai Metropolitan Region (includes Mumbai) has 48 months of unsold inventory, the June 2013 data by real estate research consultant Liases Foras shows.

For a long time no price correction has been done the price of properties. In the past year, some developers have increased the price at an average of 4%. In Mumbai, the mid-range property gained 20%-50% of capital appreciation. The capital value increased the property rates to 40%-85%.

Many of the residential projects were at affordable but couldn't meet the customer's attention. The developers didn't have any discount keeping in mind the perfect location, features and prices they have invested in their projects. However, in some markets who risks losing some possibility of considerable gains have seen a change of correction. In the residential district of a city

In addition, establishing micro markets will see corrections. Established micro markets will remain stable in the next 6-12 months.

Public wants to slow down more thinking about the safety of investment and project result.

Developers are in a condition where they have to struggle for bank finance and pay higher costs for capital from other sources as input costs have raised. They have to lower down the prices from 2% to 5% and if the buyer is satisfied, the flat will be booked. The period of gaining buyer's trust and decision-making process, have increased from15 days to 3 months.

Sluggish sales have forced firms to cut costs. Developers are launching smaller units to keep overall ticket sizes down. Shailesh Sanghvi, director, Sanghvi Group, says: “We believe buyers will soon shrug off their wait-and-watch policy. Companies may offer discounts of about Rs 200 per sq ft in coming festive season.”

Builders have no choice but to slash rates

A strong sweeping cut has been made in the price of real estate projects. Because of the rupee crash, builders' construction costs have been increased heavily. Developers are going through a tough time, as they are short of cash resources and demands are high.

Now is the time for the buyers to buy properties across Delhi NCR as the price is falling down. In South Delhi, prices are dropped from 5% to 10% and less then this in Gurgaon.

Experts say this could be the beginning of a trend that’ll last until the rupee rebounds. Until then, builders will have no bear the brunt of cash crunch.

NCR is increasing its population and popularity both and is becoming a place for buyers to buy property.

Cost’s escalating, sale price isn’t. There’s been a price correction in the past few months. The mid-range segment has seen the severest impact. It’ll continue for some time,” says Lalit Kumar Jain, chairman CREDAI, India’s apex body of builders.

The decreasing cost of properties in the market is gaining the attention of the NRIs and if the situation remains the same then NRIs will definitely buy maximum properties in India.

Developers that say with every five-rupee rise in diesel cost, they shell out Rs 115 extra per square foot. Profits will further be shaved off with cost of steel expected to go up by about Rs 1500 per ton.

“The falling rupee impacts cost directly. Many materials are imported, in high-end projects particularly,” says Arjun Puri, director, Puri Constructions.

The biggest gainer from this crisis will be the mid-range property segment.

Bangalore, Post IT boom, 60,000 units unsold

The Bangalore city has over 700 residential projects, which cost around 1.82 lakh units under development. Approximately 60,000 units have remained unpurchased.

In the year 2012, the city have absorbed 3, 774 units in a month.

As sales have not showed any purchase in the market, so the existing inventory has take 16 months time to clear. No mercies have seen for the developers in the past few years.

Bangalore will remain the cheapest market as residential prices condition is still the same in the market as sales are slow.

L J Hooker estimates show the average price of a 2-BHK or 3-BHK flat in June-end moved up marginally by 3% over the December 2012 period. While the average per sq ft rate in December was Rs 4,432, in June it climbed to around Rs 4,556.

Nagaraj Reddy, president Karnataka chapter of real estate industry body Credai, says the city has around 600 ready-to-move in residential units priced between Rs 7,500 per sqft and Rs 10,000 per sqft.

“These comprise penthouses and large 3,000 sqft-plus units that remain unsold.”

NRIs have a good opportunity to buy residential properties in Bangalore as the decrease in price value is going down. However, realtors say that hasn’t yet happened.

City’s property scene not in pink of health, Jaipur

The slowdown is beginning to trigger a price correction. Rates can come down by 10% in the short term and the market will remain stagnant for 12-18 months.

After five years later, the growth in real estate business has increased, as the property prices are double now.

Now the flats are overpriced and the customer's demand has dipped. The slowdown and high interest rates will make it unsupportive for the investors to hold on to property for long.

“A correction of 10% in the short term is likely. Thereafter prices may remain stagnant for 18 months,” says Nagen Choudhary, general secretary, Township Developers’ Association of Rajasthan. “The rupee’s freefall has not translated into any significant rise in NRI demand,” Choudhary adds.

“A two-BHK flat in the city which cost Rs 20 lakh in 2010 is now worth Rs 50 lakh,” N K Gupta, chairperson of Manglam Group, says.

“Even if there is a price correction, it won’t be deep. The city’s fundamental strengths won’t change because of a temporary slowdown,” Ajay Modi, a realty firm director, says.

CHENNAI

Reality bites: Chennai sales not express

Chennai haven't been harmed from the present realty market situation. Builders, who a year ago sold 30 to 40 suburban units a month, are struggling to touch double digits. Builders got offensive with the statistics put by the realty market analysts.

A study by consultant Jones Lang LaSalle is worth noting. Chennai’s unsold housing stock stands at a bothersome 45,000 units, it says. India’s apex body of builders, Credai, disputes this. Credai’s Prakash Challa says: “We did a count of completed unsold flats in Chennai and suburbs. It’s about 4,500. JLL apparently counted projects on the outskirts without checking how many were complete. A builder, who started an 8,000-apartment project a year ago, will take eight years to complete it. It’s unfair to list 8,000 units as unsold when the first phase construction of 1,000 flats is still on”.

Since the rupee have slide in May, the NRI enquiries are up by 40%.

KOLKATA, Premium segment hit but no dip in prices

Because of the down market situation some of the builders are tensed and offering discounts to cover the loss. They are making a price line for the properties they are left with to gain their business back in the industry.

The top end of the market where apartments cost over Rs 1 crore has witnessed a softening. “Premium projects are under pressure. There aren’t enough buyers for apartments priced at Rs 8 crore-18 crore. One can bargain for a 10%-12% discount in this segment,” Pawan Aggarwal, director of NK Realtors, the region’s largest realty firm, says. Most high-end projects are spread across south Kolkata.

Developers are determined with the price list they made for property, which has left to sell.

“There has been no price dip in formatted developments. In housing stock under Rs 6,000 a sq ft, there is still an upward trend,” Jitendra Khaitan of realty firm Pioneer Properties, says. Developers of several 5-6 storied buildings popping up off Lansdowne Road, Deshapriya Park, Christopher Road, VIP Road, Lake Town and Kankurgachi have hiked prices by 5% this year following strong demand.