Property sales drop, but rates rise; despite glut, developers are not ready to blink.
The realty market in the ‘city of the contradictions’ is not bound by the law of supply and demand. While the sales of property dived by 30% over the last year, their rates went just the other way — registering a rise of 25%.
According to Liases Foras, a real estate research agency, the last quarter-to-quarter figures followed this trend — with a drop of 17% in sales and a price increase of 5%. Delhi, on the other hand, has seen a 17% growth in sales and a 5% rise in prices. Closer home at Pune, sales have climbed by 26%, but prices are down almost by 2%. In Hyderabad, the property market rates have stabilised, but sales have dropped by almost 21%. Ditto the case at Bangalore, with stable prices pushing the sales up by 54%.
Over the last year, 525 million sqft of inventories have remained unsold in six metropolises, including 232 million sqft in Delhi - the highest - and 112 million sqft in Mumbai. Unsold inventory has been piling up with each passing year, but developers are not ready to blink, as yet.
“Big developers have a large holding capacity and they are forcing other small developers not to slash rates to increase sales. But, negotiations are on in isolated cases, which depend upon the location and the progress of a project,” said Pankaj Kapoor, managing director of Liases Foras.
Panvel, Thane and a few other places in Mumbai alone have seen a drop in property rates, said Kapoor. “But these numbers are quite small. Therefore, property rates have gone up by 25% in the year-to-year and by 5% in quarter-to-quarter surveys.”
In Mumbai metropolitan region, the average property price was Rs6,026/sqft in 2009. It climbed to Rs8,447/sqft in 2010 and to 10,021/sqft in 2011.
“The survey shows the price rose sharply between 2009 and 2010. After that, it showed no sign of a drop. If the market continues to remain sluggish, then there is a possibility that prices may drop in large numbers, thus, bringing down the average price. Buyers are not enthusiastic and are not even in a hurry to buy property, like was the case earlier. They are also in the wait-and-watch mode,” said Kapoor.
Developers blamed the increase in input costs of construction industry for refusing to climb down on prices.
“Cement, sand and labour costs have increased by several folds in the last couple of years. It is very difficult to undertake a project and complete it on time. The state government’s announcement of several rules and regulations to be put in place has also left us confused and has delayed projects by escalating their total cost. I do not think that the rates will come down in the future,” said Paras Gundecha, president of the Maharashatra Chamber of Housing Industry.
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