As election nears, property buyers turn fence-sitters

Meera Siva Updated - March 31, 2014 at 11:11 PM.

Real estate developers keep projects on hold

Businesses ranging from print media to SUV-makers do brisk business if elections are around the corner. But real estate majors claim that the polls this year have aggravated the slowdown.

Large listed developers such as Mahindra Lifespace said they were putting new projects on hold until June, as property sales turn sluggish in the election months. This is in contrast to launching three projects selling 4.5 lakh square feet of space in the first three months of last year. Real estate portal IndiaProperty.com claims that many projects in North India are now on hold, though the trend is less pronounced in the Western and Southern regions.

This comes on the back of new launches being cut in half to 57,000 units last year in the NCR, as per data from Colliers International, a real estate advisory.

But why should elections impact the property market?

One reason that builders cite is the delay in getting approvals during polls, as many Government employees get pulled into election-related work. Godrej Properties’ Garden City project in Ahmedabad for instance was delayed by well over a quarter during the December 2012 Gujarat elections.

Another reason is the high inventory that many developers are holding already, stretching their finances.

Today they are more focused on selling their existing stock and completing projects and do not have resources for new launches.

Buyers are also sitting on the fence, hoping for new tax breaks, lower interest rates or an improving economy post-polls.

During the previous elections genuine buyers did not put off their purchases, but this time it is different, says Shreekant P Shastry, Vice-President - Business at Ozonegroup.

Labour shortage

Construction activities also tend to slow down during elections due to labour shortage, as workers head back to their villages and towns to vote. “Many of them have already gone home because of Holi Festival and they will be returning only after elections, causing a shortage of about 20- 25 per cent,” says Arvind Jain, Managing Director of Pride Group.

Still, Mumbai-based Poddar Developers, which builds affordable homes and Omkar Realtors which focuses on luxury homes are not changing their plans. The impact of elections is limited to the effect on economy and nothing else is different this time, says Bharat Dhuppar, CMO, Omkar Realtors and Developers.

While developers are hopeful about a pick-up in the later part of the year, they are, just like stock market investors, hoping for a decisive verdict. Once elections are done, decisions to go one way or another will be taken, says Kalpana Murthy, Associate Director, Residential Services, Cushman & Wakefield.

Published on March 31, 2014 17:41