It has become difficult
for a common man to make out of his livelihood in these days of
inflation. Prices of commodities areskyrocketing. Even the basic
necessities of staple food including vegetables are not within the reach of
poor and middle class. Real Estate is no exception to this. The costs of
developed immovable properties such as sites, flats, villas etc are no the
constant rise since last five years. The
prices of immovable properties havegone up beyond expectation. As
the property developers normally launch their projects keeping in mind the
needs of the little class and of NRl s, the prices quoted by them for their
properties keep away the poor and middle class people. It is unfortunate that
the housing needs of poor and middle class are not seriously tackled either by
the property developers or by the Government.
The globalization saw the
boom in real estate industry for about six years or so. Now for the last couple
of months, we have been seeing recession in all sectors including the real
estate market. The recession has very badly affectedthe share market. The
commercial banks have tightened their lending policies resulting in the
non-availability of loans to the developers and the individuals. Job
opportunities have come down considerably and the recruitments in industries
and trade have come almost to a halt. Not only this, there is retrenchment of
staff in various organizations.
The recession has badly
affected the people who are employed in software and multinational companies.
Persons who have borrowed money from financial institutions for investment in
real estate are not in a position to strictly adhere to the repayment schedule
and the employees who have no such borrowings are cautiously planning their
investment options and the real estate gets their last priority. It
is noticedthat the value of the properties in Mumbai has come down to the
extent of 30%to 40%. The downward trend in Mumbai has its
impact in other major cities like Bangalore. Bangalore is considered as the
fastest growing or developing city in the country.
The investors during the
boom in the real estate felt that Bangalore as the safest metro for their
investments in property. The boom took the prices of the properties in
Bangalore to an unbelievable height. The prices were up by almost cent percent
in certain parts of the city. The developers involved in development of propertiestook
advantage of the situationand increased the rates beyond expectations. A
situation was so created that only the affluent and NRI s could think of investments
in properties. The locals had to satisfy with rented premises only.
However, the situation is
now totally changed with the downward trend in the market particularly in the
realty sector. The slump in market has resulted in a large of number of
residential flats and other properties being vacant and developers are eager to
dispose of these properties at the earliest and before crashing of the market
further. The developers arenow trying their best to woo the
buyers, particularly local buyers, by offeringattractive incentives. But,
the buyers would prefer to wait for some more time and see if the downward
trend bring down the prices to their expectation.
It is also noticed that a
large number of real estate projects are in the
pipe line and the developers have to make all possible efforts
to complete the projects and market them soon. If the under construction
projects are not completed soon by taking effective measures, the projects
would remain in their present condition only since people would not be
interested to invest in the under construction projects for obvious reasons.
It is desirable that
these projects are completed before the situation goes out of their control. In
fact to effectively market the properties and to take
advantage of the situation, the property developers may adopt new marketing
techniques of offering concessions like lowering the costs to the realistic
levels, defer payments, arranging loans, etc. They can
also consider letting out the flats on rentals instead of keeping them vacant
indefinitely with the hope of getting higher prices when the market improves.
Those who have ready
money or could raise the required funds for buying the property may benefit if
they invest now in the readily available properties. Developers may also
benefit if the ready for occupation properties are disposed of without waiting
further for higher returns.
The situation now is such
that the property developers desire to market their real estate quickly while
the purchaser wants to wait for further crashing of the property prices. In the
presentscenario noting can be predicted. However, the downward
trend, it seems, would continue for some time more and it is uncertain to
predict as to when the situation would stabilize.
year. Many young
investors made property investments at the zenith of the property cycle last
year. Two apartments were bought at the same time by several on the assumption
that they would finance one by selling off the other at a high price. Now they
are stuck as they bought at a steep market rate and have to now service two
EMIs. Some
of them havebegun to default. Many who had their bookings for
apartments with Mis. Parsvnath Developments are approaching the
developers to cancel their bookings and want to get their money back.
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