Low offtake and funds crunch is leaving little room for real estate players to reduce prices, with the possible exception of visibly overpriced market such as Mumbai.
Real estate players say that they are already operating at ‘rock-bottom prices’ with some claiming they are operating below their cost price.
RBI Governor Raghuram Rajan’s on Monday made a plea to the real estate sector to reduce prices to increase sales. “I am hopeful that as interest rates come down, there will be more credit and buying. And I am also hopeful that prices adjust in a way that encourage people to buy,” Rajan had said while delivering the Y B Chavan Memorial Lecture in Mumbai.
Kishor Pate, CMD – Amit Enterprises Housing Ltd, said, “In grossly over-priced cities like Mumbai, there is certainly more scope for reduction. Affordably priced projects in cities like Pune, Bangalore, Chennai and Hyderabad continue to sell well, so there is no scope for further reductions. It is only in over-priced markets and projects that we will see any correction.”
CREDAI, apex body of realtors, on Tuesday said there is no scope for further reduction as this would lead to rise in NPAs and non-delivery of real estate projects.
Pate further said, “While there has not been a correction in the classical sense, developers have been launching new projects at reduced rates so as to align with current market dynamics. This trend has been evident in most of the leading cities where pricing has been proving to be a deterrent to faster absorption, including Mumbai, Pune, Bangalore and Hyderabad.”
Akhil Kumar Sureka, Managing Director, Sarvome Developers said, “If at all further reduction in prices needs to be made then it would be a well researched calculation made by RBI’s sole criteria and policy decision.
The Reserve Bank of India (RBI) has lowered rates by 1.5 per cent cumulatively since January last year and earlier this month the policy rate was cut by 0.25 per cent to 6.5 per cent — its lowest level in more than five years. More than half of the rate cuts have been passed on by the banks to consumers.