Indian Property Market Slump – 5000 Jobs lost in construction in Pune

Falling sales, dropping prices and cash shortages have cause the cancellation of more than 450 real estate projects in Pune, leading to around 5,000 construction workers and many others being made redundant.

The Promoters and Builders Association of Pune (PBAP), a body that represents a large number of real estate developers in Pune stated "Construction of cheaper flats is impossible for builders at a stage when there is severe credit crunch and the buying power of Pune residents has got stagnated due to higher home loan interest rates. This has formulated into a ‘deadlock' which seems difficult to get resolved without active steps by the government of Maharashtra and Pune Municipal Corporation," said PBAP president and Kumar Builders chairman Lalitkumar Jain.

Pune, India seeing construction projects cancele and workers laid off

Pune, like many Indian markets became over heated with the rapid growth of information technology, automobile, manufacturing, education and services over the last few years, resulting in a 200% price increase over just 3 years. The PBAP is trying to blame the sudden fall in sales on higher interest rates. "We have come to a situation where we have asked all our members to sell flats at the lowest possible rates because banks are not keen on financing our new projects and unless our present flats are sold, we cannot start new projects," Jain stated.

This is of course, just hot air. Prices in India have merely reached unaffordable levels and a major price correction is now under way.

The PBAP also blamed PMC for severe increase in various premium and development charges, which the builders have no option but to pass on to the end buyer. "Our survey show that by December 2009, there would be only 16,000 ready-to-sell flats available in Pune while the demand is of more than 50,000 units. If the demand-supply gap continues, there are no chances of prices falling," Jain added.

Mr. Jain appears to be under the delusion that demand is the only determining factor as far as prices are concerned. The demand is irrelevant if no one can afford to pay.  Like many other markets, until prices for real estate reach affordable levels, the Indian property market will continue to stagnate. Indian property developers have been dropping projects fpr the last year now.Gone are the days of property developers in India wringing enormous profits from house building at the expense of the smaller investor. The recent Satyam scandal has also caused confidence in the markets and government to fall to an all time low. Drop your prices Mr. Jain.

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