The global recession and the consequent slowdown of the economy in the country promise a lacklustre Diwali for the real estate industry this year.
To counter the downturn, builders are now in the process of offering discounts to lure prospective buyers. Orbit Corporation Limited has announced a discount of 15 per cent at a residential project in Lower Parel and others are expected to follow suit.
There still remain builders who are holding on to their prices in the hope that Diwali, considered an auspicious time by buyers to purchase flats, will revive the sagging market. “We just hope that Diwali brings us some relief as we have suffered enough in the last four months,” said Anand Gupta, secretary, Builders Association of India. “If things do not improve we will be seeing lot of distress sales and massive price cuts.”
Rajesh Jain, spokesperson of Property Redevelopers Association, said builders were adopting a wait-and-watch attitude.
When recession hit the economy four months ago, the Reserve Bank of India tightened lending rules, making it difficult for builders to secure finance.
Also as a result of the steps taken by the central bank, interest rates on home loans increased tremendously, causing several families to postpone house purchase plans.
Now, adding to the turmoil is the financial collapse of global investment giants like Lehman Brothers, Merrill Lynch and AIG in recent days.
Leading builder Niranjan Hiranandani, however, did not see the problem as a long-term one.
“There will be softening of prices till April 2009, but things will look up from May onwards,” said Hiranandani. “This is all a temporary slowdown and the market will pick up.”
Unlike Hiranandani, real estate research firms limited their predictions to the near future, confirming the gloomy picture for this festive season.
“Buyers do not have the kind of cash required to buy flats at the present rates and are waiting for prices to come down,” said Pankaj Renjhen, managing director, Mumbai, Jones Lang LaSelle Meghraj. “Buyers are no longer interested in incentives but want cash discounts as borrowing has become very costly.”