If one looks at the state of Indian real estate industry one would be a little startled. The reason is at one end there is a huge back log of unsold stock which is rising alarmingly and at the other end there is a shortage of housing. In cities where the unsold stocks are high are Mumbai, Bengaluru, Delhi and the NCR region and other places too. In these places high end properties are worth crores of rupees which is not affordable by the mid income group. The target market segment is probably waiting for the economic conditions to become more stable. With the RBI slashing the base lending rates the home loan interest rate has become less which should act as a trigger in increasing the affordability assessment quotient of the consumer. Government has even relaxed FEMA and NRI investment rules to foster the growth of foreign Direct Investment (FDI).
But the question still remains that is the Indian realty sector becoming stagnant. What makes someone to think this way? Well there are many reasons.
If one listens to the radio and the advertisements one would come across many developers who are offering bizarre gifts like television, Apple computers, iPhone and even there are buy one and get one free offers as well. This may seem a bit ridiculous that how did land or apartment purchase become similar to FMCG or clothing but that’s the stark reality.
Do these offers make you think that the companies and the developers have become generous all of a sudden? Certainly not! Then what is the real reason for flaunting such generous offers? The reason is that after the construction boom in 2006 and 2007 the recession struck and the dull period of the realty sector has started from then on. There was a lull in the last three or four years in the Indian realty sector and now the condition has become acute. After the budget and the government declaring a hike on the service tax, will even increase the cost or price of an apartment or property. This has been a reason for concern of the developers across the country. They feel this hike in service tax will be another reason to slow down the sales on top of the sluggish conditions of the market.
Top office bearers of the associations like Assocham and CREDAI remarks that now there is a situation which is ensuing that will force the developers to sell the properties with losses with unsold stock and the burden of loan interest surmounting day by day. What the public wants to know is, are these offers that we see due to the reason of the down turn of the market?
According to few of the critics, it has already become a buyer’s market in few of the cities of India. This may not be so much true in case of the end user driven market of Bengaluru where the job generation is among the highest in the country, but it is certainly true for Mumbai. The scene in Mumbai is that the developers are ready to give away a square feet of built up space at just Rs. 500 as against the price of 2014 which was at Rs. 1200. There are other continuous efforts to lure the buyers with gold coins, Apple iPhones, televisions and motorbikes.
Not going into the debate whether such marketing techniques will work or not but the fact is that the demand for high end residential house units is at a lower trough. The situation according to few critics is going bad and with the hike in the service tax effective from June 2015, it is sure to go even worse. But we need to wait and watch to see what happens in reality.
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