Various freebies and discounts are offered by the developers. Though these were expected to improve the sentiments of home buyers, weak home sales prove that these offers have no impact on the sluggish realty market. Continue reading
MUMBAI: Home sales are down. The real estate market is sluggish. Yet the home prices are not affected by them. It seems that the home prices are not aware of the weak home sales. Continue reading
In a recent report, Jones Lang LaSalle said that Mumbai seems to be in a tighter spot with Rs275 billion being sunk in land since FDI (foreign direct investment) was allowed in real estate in 2005; most of which has failed to yield returns. Even many investments done in South Bombay once named as one of the hottest and costliest property location in the world have met the same fate. Read Mumbai has sunk Rs275 billion in lands since 2005, the reason is known to all. Sky high prices have put off customers. In Mumbai, an average flat costs more than Rs10,000 per sq. ft. and even in Navi Mumbai, in less populated areas, there are many projects that have flats priced at over Rs1 crore.
Add to that the confusion created by the new DCR (development control rules). Many builders now have to make fresh plans to accommodate the proposed changes about FSI; and the worst affected are those whose projects are already underway. Many of the launches have been put on hold, and construction has been stalled in many places. And for people who have already invested in these projects, the longer the deadlock lasts, the more they have to pay.
Buy or not to buy? Despite a profusion of analyses and research reports on housing prices and their future direction, home buyers remain as confused as ever. So it is little wonder that 37 lakh of flats remain vacant in Maharashtra, of which 4.79 lakh are in Mumbai. The Census Directorate data says that even Thane district has more than 5 lakh vacant flats.
“Why doesn’t the government or RBI (Reserve Bank of India) understand that the more they squeeze liquidity by raising interest rates, it raises returns on black investments even higher. If our country can bring down black element out of property, rents will fall, property prices will fall,” said a commentator.
The home-buyer, however, is at a loss. The Budget came as a flop, and a recent Crisil report says that prices of steel and cement will go up, which will probably be passed down to the end-user. And then, there is the proposal to hike on leave-license, which is going to make rentals expensive. There are some who expect matters to improve.
Pankaj Kapoor, MD, Liases Foras also had echoed similar thoughts. “The high prices are not fault of only the builders. The hike in stamp duty was uncalled for and it is too revenue-centric and indicates a short term vision.” Read Maharashtra Stamp duty hike: “Neither can you afford to own a home, nor take it on rent”
However, as most experts say, one can buy a home any time. “You never know what will happen next. And honestly, there is little evidence to suggest that customers have waited for better home loan or price options when they have to buy a home—because it is a necessity. So if you want to own a home, there is no bad time,” said an analyst.
An interactive discussion on Real Estate titled ‘Real Estate: Trends, Issues & Consequences’ was organized by Money life Foundation on May 5. The session was jointly conducted by industry experts like Pranay Vakil, Chairman of Knight Frank (India) Pvt Ltd and Pankaj Kapoor, MD, Liases Foras.
Photo by Phil SextonMr. Pranay Vakil said on the occasion, “One of the major reasons why the prices are high today is infrastructure. Nobody wants to travel long distances for work. Title insurance is another major issue in this industry.”
He added on being quizzed about the short recession, “Liquidity is vital. Developers realized this when sales volumes declined drastically due to the liquidity crunch. The slowdown gave customers ample choice as affordable housing came into the industry in a big way. Investors are ‘fair-weather friends’, Sell ‘ready’ products during a slowdown; contracts can be broken; healthy growth can be sustained by a gradual increase in prices; high-value transactions hyped by the media are not the ‘real’ market and the need is to innovate sales strategy.”
Mr. Kapoor said, “Are we heading towards another asset bubble? Are the prices affordable? What is wrong with the valuation and where is affordable housing? The government is responsible for hiking prices. We need a regulator for this industry to grow and curb wrong practices.”
The workshop witnessed enthusiastic participation from several investors, research analysts and industry experts in form of healthy exchange of ideas between them.
Ms Kavita Hurry, CEO, ING Vysya Mutual Fund asked the speakers to highlight three major issues in the sector.
On which Mr. Vakil said “Three most important things we need in real-estate as a priority are—rental housing, all over the world there is organized rental housing. Here you are left at the mercy of the broker who does not know anything. Secondly, infrastructure— the government cannot be a provider, it can be a facilitator. Thirdly, all these need funds, so get foreign parties excited about India.”
Mr. Kapoor said, “We need to address the congestion issue in the island city. If we move five buildings from the island city to Bandra, there will be a whole shift in the crowd. If we can shift Mantralaya, BSE or the Income-Tax office, there will be a difference. There are three-four magnets which draw the crowd there. Everyone knows about it but there is no intension to do that because they are sitting in luxurious places. We need to add more connectivity. We need a complete master plan for Mumbai to reduce the congestion. We need a regulator, and urban planning.”
Other industry experts also voiced their opinion.
The audience reached to a consensus which was that there is an immediate need for a citizen action forum to make higher authorities listen.
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