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Realty sector finds it hard to survive
By siliconindia
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Friday, 09 January 2009, 17:48 IST
Kolkata: Realty sector in the country is presently at its worst time as the IT and BPO companies are taking a break from finding new spaces due to global recession. To counter the crisis, many realty firms are now being forced to reduce the rentals further or postponed some of the projects, while some others are renegotiating lease agreements to stay afloat, reported The Economic Time.
Already suffering from the impact of crash in property prices and severe credit crunch, the realty industry in India is expected to face more crisis in the light of the decline in the IT and BPO business in India, leading the companies to cut additional costs. IT-ready office space rentals have declined by up to 40 percent.
Many of major realty firms in India are adopting a slow-go-policy with the current projects. "Since rentals have crashed by 25-40 percent, there is no point developing these projects immediately," said Ashok Kumar Gupta, Director of Mumbai-based realty firm Housing Development and Infrastructure (HDIL) who develops two IT SEZ in Kochi and Mumbai.
Meanwhile some others are willing to offer lower prices to go ahead with projects. For instance, Ganesh Housing, which is developing a six million sq feet SEZ in Gujarat is negotiating with potential clients. Realty majors in the IT hub Bangalore are also facing the hard side of the crisis. After failing to find takers for the space with Rs 49 per sq ft., Srinivas Reddy, who has developed some 18,500 square ft space in Bangalore's Electronic City is now open to negotiations.
Similarly, Bangalore-based Ranka Group which has developed 1 lakh square ft at KR Puram is also going through the same crisis. "We are demanding a rent of Rs 45 per sq ft but potential clients are not willing to offer more than Rs 35 per sq ft," said the group's Chief Operating Officer AK Shetty.
Raman Roy, Chairman and Managing director, Quatrro BPO Solutions opined that renegotiation on lease rentals are bound to happen now since the real estate prices have crashed considerably. "The biggest problem for the realtors will be the projects that are under construction and those that have not yet been occupied," Roy added.