Ringing in 2013 with high hopes

Dec 29 2012, 09:22 IST
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SummaryThe year 2012 has been lacklustre for the real estate sector, and sentiments remained muted for builders and buyers alike. Hopes are pinned on possible price correction and cheaper home loans

The year 2012 has been discouraging for home buyers as well as developers except some strokes of positive movements that were few and far between. During this year, home buyers found their dream house unaffordable while investors that were on the lookout for good returns were disappointed. Developers too found their projects increasingly turning unviable.

NO BANG, ONLY WHIMPER

“The entire housing driven economy has taken a setback. The governments are trying to recover revenue through higher taxes and premiums, which will be counterproductive and is resulting in the price escalations. The governments has preferred to avoid taking decisions in real estate sector to avoid controversies, which further resulted in slow down and price increase due to shortages. The business mathematics has gone wrong for most developers and this ultimately affects consumers as well as governments,” says Lalit Kumar Jain, the national President of CREDAI and CMD of Pune-based Kumar Urban Development.

The buyers had to put on hold their decision due to price escalations and inflationary pressures. Further, interest rates went on increasing and home loans were turning unviable. Festival seasons and exhibitions could not boost buyer sentiments. Gimmicks failed as well.

“Developers have consciously reinvented themselves, by launching new projects, which would appeal to customers in the current economic environment and sentiments. However, due to rising input costs and increased cost of debt, developers have not been able to lower prices. Thus many developers took to innovative marketing and pricing strategies like branded apartment, 20:80 payments etc to get better response,” says Sanjay Dutt, Executive Managing Director-South Asia, Cushman & Wakefield.

SEARCH FOR EQUILIBRIUM

Lack of sales led to rise in inventory. Holding costs coupled with rising interest forced many developers to hike prices further. However, the move could not generate desired sales. In fact, the rise in inventory translated into over-supply. This tried to push the prices downward resulting in stabilisation in many cities and a slight appreciation in some traditionally established prime residential locations where residential activity was limited.

“In an overall sluggish market during 2012, the residential space in micro markets remained stable with select projects drawing a positive response. In Mumbai particularly, the high-end residential market picked up marginally, albeit selectively, in the last quarter of 2012,” says Devang Varma, director, Omkar Realtors & Developers who has several projects in Mumbai.

The National Capital Region (NCR) and Mumbai witnessed prices moving slightly upward in few pockets while cities in southern India

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