Real estate prices set for 20% downward correction
The Financial Express – Corporates & Markets, April 1, 2009, P VIII
Mona Mehta, Mumbai
Real estate developers are planning another round of price correction – from 15% to 20% – during the second quarter of fiscal 2010 in certain metros. This comes at a time when some top builders are feeling the pressure to sell off their standing inventories as they have no other option left but cut real estate prices further, says industry experts. Recently, the government announced a third stimulus package after which realty bigwigs are striving hard towards affordable housing development and converting them into actual sales by announcing 25% to 40% dip in property prices.
Lalit Kumar Jain, chairman, Kumar Builders, and vice-president, CREDAI, told FE, “We are evaluating plans to reduce prices of affordable apartments by another 15% to 20% before Diwali. Due to the economic slowdown, end buyers are saving more, instead of investing in properties. Hence, we believe interest rates could be reduced further during the next quarter which end-buyers are currently awaiting.”
A top official from Kalpataru Properties, on condition of anonymity, said that developers who have acquired land at least six years back will be able to offer homes at affordable current market rates unlike developers who would have recently bought land during prevailing market rate in fiscal 2009. “We expect huge demand to emerge in the real estate market in the next two to three months once the interest rates are reduced further. We have reduced property prices by 35% in December 2008 in western suburbs and are witnessing huge inquiries,” he added. Anshul Jain, CEO-India, DTZ International Property Advisors, said, “There is a need for high-end residential property prices to drop by 35%, and mid-end to come down by 25% from the peak prices based on the localities. Builders have been offering free gifts, cars, followed by discounting of prices but not to the extent of 35%, especially for new projects. Further discounts is only going to add before the peak prices in general. Hence, builders will move on the right track if they cut property prices further.”
Despite using private equity funds is becoming more expensive for developers, private equity investments are expected to continue as valuations are becoming more realistic, he added.
The Financial Express – Corporates & Markets, April 1, 2009, P VIII
Mona Mehta, Mumbai
Real estate developers are planning another round of price correction – from 15% to 20% – during the second quarter of fiscal 2010 in certain metros. This comes at a time when some top builders are feeling the pressure to sell off their standing inventories as they have no other option left but cut real estate prices further, says industry experts. Recently, the government announced a third stimulus package after which realty bigwigs are striving hard towards affordable housing development and converting them into actual sales by announcing 25% to 40% dip in property prices.
Lalit Kumar Jain, chairman, Kumar Builders, and vice-president, CREDAI, told FE, “We are evaluating plans to reduce prices of affordable apartments by another 15% to 20% before Diwali. Due to the economic slowdown, end buyers are saving more, instead of investing in properties. Hence, we believe interest rates could be reduced further during the next quarter which end-buyers are currently awaiting.”
A top official from Kalpataru Properties, on condition of anonymity, said that developers who have acquired land at least six years back will be able to offer homes at affordable current market rates unlike developers who would have recently bought land during prevailing market rate in fiscal 2009. “We expect huge demand to emerge in the real estate market in the next two to three months once the interest rates are reduced further. We have reduced property prices by 35% in December 2008 in western suburbs and are witnessing huge inquiries,” he added. Anshul Jain, CEO-India, DTZ International Property Advisors, said, “There is a need for high-end residential property prices to drop by 35%, and mid-end to come down by 25% from the peak prices based on the localities. Builders have been offering free gifts, cars, followed by discounting of prices but not to the extent of 35%, especially for new projects. Further discounts is only going to add before the peak prices in general. Hence, builders will move on the right track if they cut property prices further.”
Despite using private equity funds is becoming more expensive for developers, private equity investments are expected to continue as valuations are becoming more realistic, he added.
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