A survey of brokers shows that enquiries to buy homes have fallen, with Mumbai registering a 90% drop. Brokers expect prices to drop soon.
A survey of brokers shows that enquiries to buy homes have fallen, with Mumbai registering a 90% drop. Brokers expect prices to drop soon.
The word is out on the streets. About 60 per cent of brokers expect prices in the Mumbai island city and up to Borivili to come down in the next year. Pranay Vakil, chairman of Knight Frank, global property, says he is also concerned about the volumes, which currently are 10 per cent of the sales recorded last year in Mumbai alone. “Prices are a function of demand and supply. But if volumes do not sustain, the problem will be greater and will bring the industry to a halt. Currently, only long term investors who have seen the ups and downs in the market are holding on.”
According to a pan-India survey of local brokers on the residential property market carried out by Edelweiss, global research analysts, almost 80 per cent of brokers across India have witnessed a reduction in enquiries over the past month and about 90 per cent of brokers in Mumbai have seen a drop in transactions over the past one month.
Hundred brokers in 20 micro-markets like Bandra-Borivili, Mulund-Thane, Gurgaon, Noida, Whitefield-Marathalli, Annanagar in the cities of Mumbai, Delhi, Bangalore and Chennai were polled.
According to Vakil, in order to increase volumes, developers will now cut down on quality in big projects. “In a total of 10 buildings, two will maintain high quality at a high rate, but in two he might offer low quality tiling in bathrooms and use it as an excuse to reduce his prices,” he says.
According to property experts, volume is driven by sentiment. If a buyer is sure of his ability to retain a job — essential to maintain a bank loan — he will go ahead and borrow money to buy a flat. “The situation is rather flexible. Apart from high property prices, high interest rates have cast a big question on the affordability of a flat purchaser these days,” said an equity analyst.
That the lack of demand and growing liquidity crises has developers worried was obvious at an informal meeting of 35-odd developers at a suburban five-star in Mumbai recently. With banks like Bank of Baroda, Bank of India recently announcing that they will not lend money against property, developers are worried about how to source funds for their projects. “The tightening money market has made IPOs redundant.
Venture capital funds have stopped lending and developers do not want to go to money lenders because of high interest rates of about 25 to 30 per cent. So, the only option is to either start selling faster by reducing rates (something they do not want to do) or curtail production which many of them have already started doing,” said a property consultant with a global real estate major.
According to Anuj Puri, managing director of Jones Lang Lasalle Meghraj, a global real estate firm, “Developers will have to reduce their prices if they have to beef up their quantum. I believe there is still a lot of depth in the market but at the right price. The faster the developers understand it, the better it will be for all concerned.”
m_rajshri@dnaindia.net
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