DNA
Rajshri Mehta


MUMBAI: Wanting money to buy shares in a tumbling market, an investor who held a flat at Andheri sold it for Rs1.2 crore in a deal that included parking and stamp duty registration.
Just three weeks ago he was quoting Rs1.4 crore for the 1,000 sq ft flat. Ravi Developers is offering a discount of Rs1 lakh to Rs6.5 lakh if the flat cost is paid within a stipulated period for his project at Mira Road.
Swastik Developers recently sold 47 flats at Thane by giving a car per flat and offering home loans at 8 per cent interest by tying up with two cooperative banks.
Yet, when Shailesh Maheshwari, executive with a local financial securities firm, visited a property exhibition in Vashi recently, he was stunned by the rates quoted by developers. Flats at Vashi were being quoted at Rs3,500 to Rs6,100 a square foot, at Belapur for Rs3,200 to Rs5,100, and at Airoli for Rs2,500 to Rs3,500.
“Why?” said Maheshwari.
It’s a question that is bothering many house hunters. Over the past few months, brokers and developers admit, there has been a 45 per cent drop in the number of transactions. Some developers like Nahar Amrit Shakti and K Raheja are offering disguised discounts. Why, then, are developers not reducing prices upfront?
“Developers are squeamish about having to drop their rates for they don’t want to be seen being flexible,” says Anuj Puri, country head, Jones Lange Lasalle Meghraj, a global property consultant.
“They think it would undermine their credibility with regard to pegging proper market prices.”


Developers usually sell some properties (residentialcommercial) to investors even before a project is announced. This helps them to fix a benchmark price for genuine buyers later. Since the benchmark is determined in the initial phase of the project, the investors do not lose out.
According to a senior executive with a housing finance company, about 30 per cent flats are sold first to investors, squeezing availability in the open market. Genuine users then have to pay higher rates.
Besides the money generated from pre-sales, property experts said, developers are rolling in money raised from low-cost borrowings, IPOs, and equity from foreign funds.
“But over the past few months, the developer has had to account for high land cost, cost of construction, TDR, and labour costs,” says Ram Prasad Pardhi, proprietor, Pinnacle Realty. “If he sells at a lower rate, what will he do for the two years it will take his other projects to get completed? He cannot afford to let the interest rate meter tick if he has bought the land at a high rate.”
According to Puri, however, developers over the past year have recovered the cost of land and construction by selling large chunks of flats in phases. “As earning profit is the sole concern, they are taking time to sell the balance flats,” he says.
“Bad government polices are leading to lopsided development,” says Sanjay Shenoy, a broker in Andheri. “For every 1,000 sq ft new commercial office built, 5,000 sq ft residential area has to be constructed. This is not happening.
Instead, more commercial space and retail spaces are getting developed as they bring greater profits. This, in turn, is causing property prices to rise as there is too much money chasing too few properties.”
Shenoy also points out that most investors in the residential sector today are senior-level management executives, who already own a flat. They may have bought the flat on loan in the 1990s and have already repaid the loan, thus encouraging banks to fund their second flat.

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  • Property rates in Pune are up already.

    They haven't come down; they were down till last year (december) but then after second half of december they are rising or constant.
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  • Check the volume growth. Then you will know the truth!

    Folks,

    Quoted prices swing wider than actual sale prices. The only way to be sure that sale prices have not actually firmed up (or have a reason to firm up) is to check registration numbers and see if a rough comparison can be made with for-sale inventory.

    This is easily done in the US and other developed countries (which is why they are called developed), but much harder here.

    If prices are being talked up despite volumes not going up much, you cn safely assume this is only a (desperate) gamble by builders.

    In any case, 2010 is likely to be a hostile year for builders and we will see how they can handle it without bringing down prices!;)

    cheers
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  • Originally Posted by ahirman
    A lot of people are trying to link falling realty prices across the world specially in US to India. Its really s to Oranges.

    Real estate prices never go down in India and never will. The reason is we dont look at realty as a financial instrument with all other available investment options. Also we are more emotional with it. Demands has been always high and supply low and seller knows that wait and watch pays.

    Prices will stagnate at the most before climbing up steadily again but the kind of correction we see in US market is something which is never going to happen in India.

    How much long will stagnate and with what rate they will climb back will depend on the location you are in and it differs widely. For Individual sellers its wait and watch time and for builders its time to throw in some freebies to attract crowd.



    I somehow disagree with you. You are missing a very important point. The point is that in the last 60 years the propoery was developed by goverment agencies & there were very few private developers. So the supply of houses was very restrictive as it was in hands of goverment agencies. But now its different. Private developors have come in market & we are aheading towards an oversupply zone in Housing. This is the phase which India has never seen & hence till now prices of property have now gone down. Its similar to telecom/car market wherein BSNL/MTNL/ Ambessdor/Fiat were the only choice available to consumer but when private players entered the market then you see what has happened to the prices. Prices have been going down & down.

    I request all of you to please be careful while investing your hard owned money because real estate market is such an inefficient market as prices are goverend by speculation more that the real demand supply situation.
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  • I'm not an expert but I can share my experience.

    In bangalore, the RE sales are still very dull and it looks like buyers more stub born than what I had thought. some of the best located sites/plotsthat I'm interested and inquired 9 months ago are still sitting in the market. I get calls from diffrent brokers for the same site at different times. Initially they say that market is going up and this is the last chance to buy at this price. When I rejected their offer outrigtly, they go away and call back after 1-2 months saying the the sellet is willing to negotiate for the better price. I have stopped looking for properties from past 3 months and I have no regrets as most of the properties that I saw are still not sold indicating the fact that the prices they quoted were too high and there are less number of fools this time to put in huge amount for someone's big profit. BTW my budget was from 60-70L which is slightly at the higer point of the mid range market in bangalore.
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  • The freefall in commercial property prices may be nearing an end.And while improvement is likely a year or two away, the pace of declines may be less dramatic than it was in 2008 and 2009. While it might not seem like good news, the latest figures on commercial property prices suggest that the real estate market is stabilizing
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