Demand down, inventories up: realtors grope for solutions | india | Hindustan Times
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Demand down, inventories up: realtors grope for solutions

Indians are not buying homes now like they used to, thanks to high prices and costly loans. There is a 30% rise in the inventories of real estate giants over last year, at Rs 25,000 to Rs 30,000 crore.

india Updated: Jun 16, 2011 00:23 IST
Sachin Dave

Indians are not buying homes now like they used to, thanks to high prices and costly loans. There is a 30% rise in the inventories of real estate giants over last year, at Rs 25,000 to Rs 30,000 crore.

The developers themselves deny that inventory is piling up, but industry experts say that the high price levels are acting as a deterrent for potential investors. Mumbai and the national capital region (NCR) are the worst-hit, they say.

Three of the top 10 real estate players by market size — DLF, HDIL and Indiabulls Real Estate — have inventories worth Rs 23,197 crore on their balance sheet as on March 31 2011 (see table), with year-on-year increase of 26%, 28% and 93% respectively in holdings.

“If you go through the property registration figures in Mumbai in 2011, you would see that there is a sharp fall (year-on-year) of 20% to 30% depending on which month you’re looking at,” said Pranay Vakil, chairman of real estate consultant Knight Frank India. “This reflects a fact that buyers are not willing to enter the real estate market at present prices.”

A detailed email questionnaire sent to DLF, HDIL and Indiabulls remain unanswered.

A senior official at DLF said the high inventories or stocks that appear on its balance sheet merely reflect the accounting method of the company.

The top 10 real estate developers listed on the Bombay Stock Exchange (BSE) have a total inventory of about Rs 25,000 crore, going by their account books. Many realtors who are major players in their respective markets are not even listed.http://www.hindustantimes.com/Images/HTEditImages/Images/16_06_biz25a.jpg

“If you compile the total inventories of all developers in India, the figure would be unimaginable,” said a senior analyst with a real estate consultancy.

In Mumbai and the NCR the prices have increased by at least 40% since the beginning of 2010. Lately however, reduction in cash flows due to lower sales has led to many developers putting their land parcels and projects on the block.

Hindustan Times had earlier reported that many developers including HDIL have approached their cash rich counterparts with offers to sell or develop land parcels or properties.