Like many real estate sectors, the Indian retail property sector relies solely on continual growth to survive and that growth has come to a standstill over the last few months as the credit crisis takes it’s toll.
Optimism – or Denial? Indian real estate magnate Niranajan Hiranandani does not expect property prices, which have dropped by about 25% in the past year, to decline any further. “Rates have fallen by about 10-25 per cent over the past year-and-a-half. I do not expect rates to fall any further. So, I think people should start buying homes now,” Hiranandani Constructions Managing Director Niranjan Hiranandani said last week.
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A recent initiative by the Indian government to prop up property developers by allowing banks to restructure and extend loans is backfiring and turning into another fiasco. Last December, the Reserve Bank of India (RBI) relaxed a key rule on restructuring bank loans to the real estate sector as a one-time measure to help Indian real estate developers cope with falling demand and a credit crunch.
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.
More on Indian Property Market Slump – 5000 Jobs lost in construction in Pune
Speculation that accounting practices in the Indian real estate sector are suspect is running high at the moment, causing many (myself included) to wonder just how far the sector is going to crash and how many frauds are going to come to light. Senior board members of no less than six top real estate companies have resigned unexpectedly in the past few months, in much the same way rats leave a sinking ship.
Real estate developers in India have begun concentrating on budget homes instead of luxury developments. Prices have been falling and demand has been weak for luxury property in India for some time now, but recent government incentives in the form of interest reductions on smaller mortgages and government payouts have given a much needed boost to the “affordable,” segment of the market.
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Much like the UAE-based “news” sources, the Indian ones seem also to rely on press releases instead of providing any sort of genuine information. Any fool can see the Indian luxury property market is in trouble, with developers canceling projects, laying off staff and prices falling through the proverbial floor. But putting out press releases to the contrary does no one any good. At best you might attract a gullible buyer, but when the time comes for a mortgage, the banks are not going to fall for it. Take this “news” source for example. Here are snippets from two articles from this Sunday’s online edition of The Economic Times -
More on Luxury Property Market in India – Lying Will Not Help The Situation
Discussion forums can be an excellent way of determining the true state of a market. Unfortunately, many so-called “discussion forums,” are populated almost entirely by real estate agents – and do not give a true picture. One of the research tools we use to sift through the sales pitches when discussing prices are forums. This is a brief list of forums that are populated by genuine people talking about the “for real,” situations they find themselves in. If there is a market I have missed that You are interested in, please drop me a line and I will see if I have one on my collection – Contact IPI.
Mumbai real estate bosses were forced to take some drastic measures to keep up the interest in real estate in the city, after there was a slump in the beginning of July. The total real estate intake of the city was been left at just thirty percent of what it was. Of course prices have been affected by this slump with them going done anywhere between 10 to 15 per cent in most places. Industry insiders say that this is also the case in Delhi.
Affordable Housing in Mumbai is what Everyone Wants
Today, for many people in Mumbai, owning a house is a distant dream. The rates of real estate are quite unaffordable to the middle class man. Many people look at properties that are away from the main cities to far off suburbs such as Vasai, Virar etc. But a number of people find even these places quite unaffordable. In addition, many complain that the crowd and the amenities are just not worth it.
