Looking for a home but not getting anything good in your budget? Well, your wait and frustration may soon be over as the price of the property houses is expected to drop significantly amid builders’ financial crisis.
As per a recent report by real estate research firm Liases Foras, homes are expected to become a bit cheaper as builders soon will have no alternative, but to reduce the prices by a minimum of 10% owing to the funding crisis. The last year’s IL&FS scam has badly affected the funding to the real estate sector. Financial institutions, as well as private funds, are reluctant to extend loans.
To add to the burden, inventory is piling up in all the major Indian cities. Like, the Mumbai Metropolitan Region (MMR) sees a sale of almost 70,000 units annually, of which 18,000 units are sold in Mumbai region. But now, the number of unsold units has reached a staggering 2.80 lakh houses in MMR, of which 1.30 lakh are in Mumbai alone.
“It has now become a matter of survival for builders,” Hindustan Times quoted Ashok Mohanani, vice-president, National Real Estate Development Council (West), as saying. “We may see price cuts in the coming days.”
Apart from the funding crisis, the introduction of the Real Estate Regulatory Authority (RERA) has tightened screws, as it disallowed taking money from homebuyers without getting proper approvals. Funds from private equity are scarce and come with a very high rate of interest.
Various developers are claiming that financial institutions are stopping even sanctioned loans.
“How can we carry out ongoing projects without the funding?,” Paras Gundecha, former president, Maharashtra Chambers of Housing Industry (MCHI) and CMD, Gundecha Group, told the publication. “The government, which charges a huge premium, needs to intervene or else we will never be able to complete our ongoing projects. Forget profit margins, even completing projects is not easy.”
Now that the majority of builders’ funds have dried up and there is a pile of inventory breaking their backs, they are apparently left with no other option than to almost double their current sales to stay afloat. For this, they will need to reduce the prices, as low as 10 percent, to attract potential home buyers, investors, and fence-sitters.
Read more about expected property trends here.
