A Lackluster Diwali for the Indian Real Estate
Diwali, the festival of lights is a much awaited time of the year for all businesses; be it the jewellery, retail, automobiles, real estate. Though Diwali 2014 was a shining one for most segments, the Indian real estate however says it was a lackluster Diwali for them. The Indian real estate which is struggling hard to overcome the market sluggishness had high hopes for the festival season, backed by the NDA governments new reforms, tax sops for home loans, and RBIs steady rates.
Indians usually consider festival time as auspicious for property purchases, and no wonder October-December is the time of the year when real estate developers expect maximum sales and work out strategies and offers.
This festive season, especially after the new NDA government’s budget stressing affordable housing, most real estate developers concentrated on the mid segment, ie, the 40-80 lakh segments rather than the luxury segment. As the buyers of this segment are most middle class who depend on home loans for their funding, real estate experts believe that many had put a hold on their purchasing decisions waiting for the home loan interest rates to come down. With the Reserve Bank of India (RBI) leaving interest rates unchanged in the last two monetary policy reviews, many are expecting the rates to come down with the next review.
The low sales in the real estate are making higher stockpiles in all cities which means supply is more than demand, said Prabhakar, director of Gopalan Enterprises, Bangalore. Since the number of launches is also showing a downward trend, there is hope for balancing demand and supply.
As per the report of Knight Frank, a real estate consultancy firm, there is a 32 per cent drop in new launches and 27 per cent drop in real estate sales during the first half of 2014.
However, they also commented that second half 2014 will see a 26 per cent growth with Mumbai and Bangalore leading the space. The report initiated by Jones Lang LaSalle (JLL) says that new launches have been reducing steadily since the first quarter of 2013, and while sales were dipping by 6.7 per cent in the same period. The report by UBS says that the National Capital Region has been badly hit by this sluggishness with 74 per cent decline in pre-sales and has been doing comparatively good in this regard with just 21 per cent decline.
However, the real estate experts and giants have a mixed response in this regard. Mr. Jitu Virwani, chairman Embassy group announced that they had 100% sales jump during this Diwali season. Mr. Manoj Gaur, MD of Gaursons is of the opinion that this Diwali was better than last years’ and sales were just only lower than expected. However, he opines that the stockpiles need to be cleared at the earliest.
As most builders agrees that the number of enquiries have gone up but the conversion is not happening despite all discounts, all are eyeing towards RBI for revisions in home loan interest rates.
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