Housing prices are not likely to fall anytime soon, experts say. There is no pressure on developers to slash prices, as they have the backing of investors and do not have to think about the ordinary homebuyer.
"What we will see is a lowering of prices in individual projects, depending on the level of stress the developers involved are going through," says Anuj Puri, chairman of the CII Real Estate conclave and country head of Jones Lang LaSalle India.
The high property prices are not even helping developers as they are also in debt. The cash generated by selling properties today is much less than what developers require for construction.
Analysts say there is no pressure on developers to reduce prices as it is investors who drive the market today with excess capital, and not people in need of houses. The high returns investors get in Mumbai and Delhi only means the homebuyer is always overlooked.
"If a developer faces financial trouble, he will sell 5-10 apartments to a high net individual (HNI) investor at a discounted price," says Ramesh Nair.
Backing his view, Pankaj Kapoor from Liases Foras says the widening gap between the prices and affordability is because of the speculative market practices of investors, who buy housing stock knowing that prices will keep going up. One big deal made by an investor can have cascading effects and prices can shoot up overnight.
Earlier, many such deals went through in Mumbai, when the market was booming. Pankaj Kapoor from Liases Foras says, "One would notice that all the high- priced land deals were later blessed with incentive FSI to make a project viable. Developers, and perhaps the politician [policy makers], did gain but it spoiled the urban economic balance, leaving the whole city lurching on high prices."
"All the affordable housing schemes are plagued by investors: you have empty buildings while the needy live on the road, or are being forced into the slums."
One of the major reasons why the investor controls realty is that banks are not too keen on lending to the real estate sector, and this has affected the cash flow of developers, forcing them to look for investor funding. And there is no regulatory body to keep a check on them.
Anand Gupta, general secretary, Builders Association of India, says developers are not holding back stock. "The blame should be put on foreign investors, including NRIs, who buy houses in Mumbai. It is because of them that so many houses are unsold."
Developers say they are also affected by high construction costs and stringent regulatory regimens. They say that a lack of government initiative makes it hard to keep up the housing supply, making it harder for property prices to go down.
Several projects are stuck, waiting for various clearances such as those from the environment department, and there is also much confusion about the payment of value added tax, premium charged on fungible FSI, the liquidity crunch, and other issues. These hurdles also discourage developers from launching new projects, says Sunil Mantri, chairman, Mantri Realty. "If they release the supply, prices will automatically fall." Developers are now trying several means to catalyse sales and attract homebuyers, but with little success.