Looking for an apartment in the Delhi/NCR or Mumbai regions? You could hope for easier prices, say some industry experts.
With the forced cheer of a difficult festival season drawing to an end, developers, who are already sitting on huge inventories, are likely to come under immense pressure to increase cash flows by slashing prices as interest rates increase their expenses.
According to data available on stock exchanges, 25 listed real estate companies have a total of around Rs 40,000-crore worth inventories on their balance sheets. Also, the Mumbai Metropolitan Region and National Capital Region have 250,000 unsold apartments.
"Urban economics has gone haywire as inventories are piling up because people are unable to afford property at current prices," said Pankaj Kapoor, managing director, Liases Foras, a real estate research firm. "Developers are facing serious cash flow problems and we can see it. Inventories are only going to increase in the next six months."
However, real estate prices have stayed stagnant in 2012 in Mumbai with a mere 0.3% increase in rates, a research report by Knight Frank says. Figures show that real estate sales have been falling by around 25% year after year since 2010 because of high prices.
Industry trackers say that real estate developers have been applying the brakes on project launches. The number of project launches that happen around Diwali in Mumbai and NCR have gone down by around 40% and 45% respectively.
But there are some who say easier prices may not be, well, easy. “It is not as simple as it looks,” says the chief financial officer of a listed firm. “Large investors buy properties only to speculate. They would never let developers slash prices.”
While in 2008, listed realtors brought qualified institutional investors in to rescue them, between 2009-2011, private equity players saved them. At this point, there are no more rescuers in sight.