Realtors to cut prices in pockets?
Discounts or price cuts in home prices may be just months away, at least in some parts of Mumbai and NCR, as developers respond reluctantly to pressures from the finance ministry and their apex association to slash a pile of unsold homes estimated to be worth Rs. 200,000 crore, reports Sachin Dave.india Updated: Dec 06, 2012 01:39 IST
Discounts or price cuts in home prices may be just months away, at least in some parts of Mumbai and the National Capital Region (NCR), as developers respond reluctantly to pressures from the finance ministry and their apex association to slash a pile of unsold homes estimated to be worth Rs. 200,000 crore.
Real estate industry association CREDAI has urged its members to slash home prices, and real estate developers, reeling under an inventory pile-up and huge debts, may resort to cutting prices in select projects and areas in the two metros.
“Prices of residential real estate sector would not come down across the board, but it would certainly come down in selected projects and locations in Mumbai and NCR,” said Niranjan Hiranandani, managing director, Hiranandani Group.
“There is a fall in demand in some areas, like Parel in Mumbai, as there is ample supply, so prices would be impacted.”
In the Mumbai Metropolitan Region (MMR) alone there are more than 100,000 unsold apartments of various sizes collectively worth more than Rs. 100,000 crore.
The NCR has an unsold inventory of around 194 million sq ft, according to an analysis by independent consulting firm Liases Foras --- also worth more than Rs. 100,000 crore.
Top listed real estate developers have around Rs. 40,000 crore worth of inventories. More worryingly, their debt totals around Rs. 35,000 crore. Going by Mumbai property registration figures, real estate demand fallen of about 25% year-on-year.
CREDAI — the Confederation of Real Estate Developers Association of India — has asked its members to reduce prices to boost sales.
“Positively responding to finance minister P Chidambaram’s suggestion for reducing the price of housing stock, CREDAI has asked its 8,000-plus members across the country to seriously consider the proposal to sell in maximum numbers,” the industry body said in a statement on Monday.
It has also suggested a 10-point agenda to the government for putting the real estate sector back on the growth track.
Developers on the other hand cite interest rates, land costs and increased raw material costs to refrain from price cuts.
“In an open economy prices are decided by the demand and supply, even in real estate sector,” said Rajeev Talwar, executive director, DLF. “Residential apartments can be made more affordable either by reducing prices or slashing interest rates, and the latter is more feasible.”
“There is no price correction on the cards, but the quantum of appreciation has definitely reduced significantly in all the top seven cities of India in 2012,” said Arun Puri, country head, Jones Lang LaSalle India.
According to industry reports, real estate prices in India have been more or less stagnant in recent years.
Industry experts say that real estate developers are also facing liquidity issues, as banks are cautious lending to the real estate sector. Even private equity players who were aggressively buying stake in projects have turned wary in the last six months.