Property rates might not come down in the near future
Pallabika Ganguly 30 December 2009

The real-estate segment is cushioned with funds from investors and banks. Ergo, players may not reduce prices in the near future

Real-estate developers are not ready to lower the prices of their properties for end-users as they are cushioned with funds from banks and investors. The real-estate sector is flush with approximately Rs96,700 crore-Rs1,17,000 crore worth of funds, which it has raised through different means like Qualified Institutional Placements (QIPs), foreign currency convertible bonds and foreign direct investment.

“Prices won’t come down immediately because developers are utilising the funds that they have raised earlier. The correction phase will begin again, because inventories are piling up and the market has to show steady growth,” said Pankaj Kapoor, founder, Liases Foras.

According to Reserve Bank of India data, total lending by commercial banks to the real-estate sector was Rs96,701 crore from April 2009-August 2009. At present, developers are not fretting over end-user sales, as they are flush with funds; most of them have restructured their debts through the money they have raised from the markets.

“The December quarter will show 50% less sales than September because of the hike in prices. We will soon come back to the 2008 situation. I feel we will soon see sales in the Mumbai Metropolitan Region touching 12,000-10,000 units in a quarter, which is very less,” said Mr Kapoor.

End-users may have to wait for three-four months to secure properties at reasonable prices. To see a steady growth in this sector, builders will have to witness a minimum monthly sales growth of 3.5%-4.5%, considering the unsold inventories that they have in hand.

“One of the best quarters (for developers) was June 2009, when they enjoyed a healthy sales-to-inventory ratio. For the real-estate sector to exhibit a price correction, stock market valuations have to come down,” said Mr Kapoor.

1 decade ago
Real estate prices in the major cities will see a sharp upswing in 2010 as liquidity flows from overseas in FDI investments will rise
1 decade ago
State is doing nothing to control the property prices. I understand price rise to some extend is acceptable but rise 5 times in 3 years is unacceptable but this is reality. When prices go up government smiles, builders laugh but common man cries. Why housing is not part of the necessities in the government’s agenda. If food can education can why cant the housing. Why government want our 50% people live in slums when it can provide good housing by properly controlling this sector. Why there is no effective regulatory body in this sector like we have IRDA or TRAI. Why petrol prices are controlled, food prices are controlled but no control on the property prices. Property owners become greedy day by day and this price rise is paralyzing the whole system. One generation bought a house in a good locality which was on the outskirts of the city sometime back. The next generation sales the same house at 10 times of rate and earns bread and butter for the rest of whole life, shifts to another outskirts of the city. Now the same man could have earned his bread and butter by doing something constructive for the country but what he did, he earned everything for the whole life by doing nothing. So this way we can say the price rise is making people lubber/lazy and this is very dangerous for the country. Another problem with price rise at this rate is causing corruption in the society because common man will indulge in it to fulfill his basic necessities. Rich remains rich and poor remains poor the truth of current Indian society. I think there has to be some law that prevents wealth transition from one generation to another this will enforce people to work more and this is the need of present day.
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