NDTV Profit | Written By: Varun Sinha | Updated On: March 17, 2015 14:00 (IST)
Home sales in India have been under pressure for the last many quarters forcing real estate developers to come up with innovative measures to sell apartments. Gurgaon-based ILD is promising home loans at just 4.99 per cent, a 50 per cent discount to prevailing interest rates to prospective home buyers.
DLF, India’s biggest realty developer, has launched a discount scheme for high-end apartments, while Noida-based Supertech continues to promote its “buy one flat, get one free” offer. (Read)
But when buyers start coming across advertisements for “swine flu free homes”, like the ones Noida-based KVD Group is claiming to build in Greater Noida, it becomes evident that some developers are getting desperate because of the sustained slowdown in property markets.
The uneasiness among property developers is easy to understand. Sluggish demand for new homes has led to rising inventory of unsold flats, which in turn is weighing on balance sheets in the form of mounting debt.
Reasons for Stagnancy in Property Markets:
1) Slow Economic Revival: A year ago, there was massive expectation that the formation of a strong government at the Centre would lead to a revival in the domestic property markets. The optimism was based on hopes of strong economic recovery, which has not happened yet. While India may end the current fiscal year with over 7 per cent growth, according to new GDP calculations, economic realities on the ground have not changed significantly to give a big push to the realty sector, analysts say.
2) High Interest Rates: The Reserve Bank has cut its repo rate by 50 basis points in the last two months, but commercial banks are yet to lower lending rates, both for new loans as well as existing home loans. Higher EMIs continue to be an overhang on the real estate market, analysts say.
3) High Property Prices continue to a major deterrent for prospective buyers. Builders have been holding on to high prices despite low demand.
There’s little evidence to suggest that an imminent revival is on cards. State Bank of India, which had put up around 300 properties worth Rs. 1,200 crore on the block, could sell only about 130 properties, realising just about Rs. 100 crore in an auction last week. (Read)
The Ficci-Knigth Frank real estate sentiment index, used to gauge current and future sentiment in the property market, dropped for the first time in five quarters for the three- months ended December 2014.
“Stakeholder sentiments in the residential space have seen a sustained fall… Increasing illiquidity caused by falling transaction numbers and delayed economic revival have weighed down the market,” the sentiment index report said.
According to Sanjay Chandra of Unitech it may take a few more quarters for the demand in residential space to revive.
Source : http://goo.gl/D5kjiI