The real estate industry, which saw unsold inventory and rising debt burden in 2011, expect the glut to remain this year as well.
Analysts, however, expect an improvement in terms of completion of existing projects, as they are likely to focus on execution and timely delivery during the new year.
The year 2011 witnessed higher unsold inventories and delay in project execution due to continuous rate hikes by the Reserve Bank of India, forcing buyers to delay purchases, which led to a liquidity crunch for developers and high construction cost due to increasing input prices.
The realty industry is sitting on a debt pile of close to Rs. 45,000 crore as of now. This is despite the fact that the RBI had put in place a number of measures to prevent a bubble in the industry.
Gross bank lending to the real estate sector grew by 11.6% compared to 15.7% during the corresponding period last year. Similarly, the FDI inflow to the sector, too, showed a 26% decline even on annual basis.
In addition to this, regulatory bottlenecks such as delay in project approvals and land acquisition-related uncertainties also resulted in unease among developers, forcing them to go slow on new launches.
“The near-term outlook for residential real estate market is likely to remain cautious in 2012, given the likelihood of low market sentiment,” said Samir Jasuja, chief executive, PropEquity.
Besides, key market indicators, including absorption and new launches are likely to remain low given the execution concerns, he said.