With the Reserve Bank of India leaving interest rates unchanged, the country's real estate sector is already feeling the heat as disappointed customers shy away from buying properties, industry experts said on Wednesday.
Sales of real estate companies have been dipping for the last two years, with developers, especially those in the National Capital Region (NCR) and Mumbai refusing to slash prices. As a result, unsold properties or inventories on the books of India's top-ten listed realty players have gone up by 13% at Rs. 41,455 crore so far in 2012."Real estate developers are holding on to high prices despite the fall in demand," said Ambar Maheshwari, managing director, corporate finance, Jones Lang LaSalle India. "High inventory combined with debt does put pressure on developers to slash prices, but that may not happen. Instead prices will remain stagnant for the next 18 months."
According to a latest report by PropEquity, a real estate analytics firm, absorption or sale of residential units in the Mumbai Metropolitan Region (MMR) and the NCR has come down by 50% in the first three months of 2012 compared to the year-ago period. In the NCR 15,104 houses were sold between January and March this year against 35,420 units last year. The MMR witnessed sales dropping to 11,473 in the first three months of this year from 27,676 in the same period last year.
Real estate developers blamed the government for the rising inventories on their books. "In Mumbai, the state government has been slow in giving required permissions to real estate developers, resulting in high inventories," said Vyomesh Shah, MD, Hub Town, a Mumbai-based real estate firm.