It
has become difficult for a common man to make out of his livelihood in these
days of inflation. Prices of commodities are
skyrocketing. 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 have
gone 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 affected
the 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 noticed
that 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 properties
took 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 are
now trying their best to woo the buyers, particularly local buyers, by offering
attractive 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 present
scenario 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 have
begun 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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