Investors to Keep Realty Prices High

Bangalore: Housing prices are not likely to drop in the near future, according to market experts.  Developers are in no hurry to cut property prices, as they are getting support from investors, which is diverting them from the potential home buyers, reports Swati Chitnis, Hindustan Times.

Anuj Puri, chairman of the CII Real Estate conclave and country head of Jones Lang LaSalle India said that “What we will see is a lowering of prices in individual projects, depending on the level of stress the developers involved are going through,” reports Hindustan Times.

Even high property prices fail to help developers as they themselves are debt-ridden. The cash that comes in from property sale is also insufficient in comparison to the amount required for new construction.

 “If a developer faces financial trouble, he will sell 5-10 apartments to a high net individual (HNI) investor at a discounted price,” said Ramesh Nair of JLL.

On this context, Pankaj Kapoor of Liases Foras stated that the increasing gap between property prices and affordability is due to the investor’s speculative market practices as they buy property with awareness that the prices will increase further in coming years. If investors make a huge transaction, it can create a cascading effect with prices rising immediately.

Over the past, Mumbai has witnessed many such deals, when the real estate market was in flourishing mode. “One would notice that all the high- priced land deals were later blessed with incentive FSI to make a project viable. Developers, and perhaps the politician [policy makers], did gain but it spoiled the urban economic balance, leaving the whole city lurching on high prices,” added Kapoor.

“All the affordable housing schemes are plagued by investors: you have empty buildings while the needy live on the road, or are being forced into the slums,” reports Hindustan Times.

The key reason due to which real estate sector became investor driven market was due to banks showing less interest to release fund in real estate sector, which led to limited cash for developers to develop new projects. This resulted in developers approaching investors for funding.

Anand Gupta, general secretary, Builders Association of India, says developers are not holding back stock. “The blame should be put on foreign investors, including NRIs, who buy houses in Mumbai. It is because of them that so many houses are unsold.”

Developers are also suffering from increasing cost of construction and strict regulatory regimens. Also developers are facing lots of issues in terms of project clearance, project delays, liquidity pressure and so on. Such kind of hurdles discouraging developers to come up with their new launches, according to Sunil Mantri, Chairman, Mantri Realty. He further added that “If they release the supply, prices will automatically fall.” However, developers are trying their best to attract homebuyers, but with less avail.