No festival cheer for realty developers as consumers on wait-and-watch mode

Mid-size developers, which were banking on festivals to help them clear existing inventory, may still need more time to show a black profit graph.

Though enquiries have gone up by 45 per cent, the transaction size is not growing proportionally as the market remain flat due to a combination of factors weighing down on it, says industry watchers.

Typically, in North and Western India, the festival period starting from Navratri-Dusshera-Diwali account for a big ticket purchase like houses with about 25-30 per cent additional sales happening during this period as people consider this an auspicious period.

Ganesh Vasudevan, CEO of Indiaproperty.com, said, “Developers have tried to trigger consumer interests that have resulted in substantial enquiries over the past one month. The enquiries have increased by 45 per cent. However, this is not reflecting in the transactions as consumers are still fence-sitting and even hoping for rate corrections.”

High inventory levels

A report by Jones Lang Lasalle said the real estate sector has high inventory levels with Mumbai having an inventory of close to 48 months, Delhi of 23 months and Bangalore of 25 months. This is above the comfortable level of 14-15 months, the report said.

Rohit Raj Modi, Director, Ashiana Homes, said, “External environment is volatile. Land acquisition funds are not available and consumers are taking longer to settle a deal even in the mid-market segment where we operate.”

Realty watchers note that business in festival season has been slower this year compared to last year's. The percentage drop in sales this festival season, according to consultants, could be in double digits.

Vikash Gupta Joint Managing Director of Earth Infrastructure, said “Consumers are looking for bargain from bankers and builders. Many consumers are postponing buys till general elections are over as they expect rates to soften. However, we expect the prices to move up.”

Property consultant Cushman &Wakefield in their latest report stated that top eight cities witnessed total estimated residential unit launches of 1.32 lakh units between January and September 2013 which represented a mere increase of five as compared to the same period for 2012.

Shveta Jain, ED, Residential Services, Cushman & Wakefield, said “Contrary to tradition, there has been a decline in new launch activities in the third quarter as economic conditions have not been encouraging for developers. This was because of slow demand with consumer confidence at the lowest on account of increased and consistently high pricing in key cities.

“Having said that, the demand from first time buyers and end users has been consistent as genuine buyers with adequate capital look at this phase as ideal to enter the property market on account of stable capital values.”

COMMENT NOW