Delhi, India (PressExposure) June 04, 2009 -- The election of a stable government at the Centre could bring a bottom to the real estate market and may help in turning it around, as improved economic sentiment and rallying stock markets bring back confidence into the battered sector, industry experts say.
The real estate sector has seen a steep fall in prices in the past year, with the countryâs financial capital Mumbai, for example, seeing an average correction of around 40% this quarter compared to the corresponding quarter last year. Many other cities and towns across India share a similar fate.
Prominent developers such as Kalpataru, Lodha, Rustomjee and Acme Group have been quoting prices 20% lower than their card rates six months ago, say industry insiders. In the case of Godrej Properties, the fall was even sharper at 30% for its Planet Godrej project in Mumbaiâs Mahalaxmi area, they said.
Property market experts say there was a risk prices would have fallen another 20% by December had the elections not thrown up a stable government. âThe (Congress-led) UPA has a clear mandate...The stock market is expected to give a big thumbs-up to the new government. If the stock market goes up, real estate prices will also go up,â said the owner of a big real estate group, who asked not to be named.
The relentless fall in prices in the past few months coupled with high rates and tight availability of money has kept away home buyers, putting developers on the defensive.
âThere is no liquidity in the market. So even when prices fell, the properties seldom found buyers. A stable government at the Centre is good news and will stabilise property prices. However, if the consuming power of the people does not improve, real estate prices will fall again,â said SN Chopra, a property consultant based in south Mumbai.
Although liquidity remains a problem for many developers, a perception gaining ground is that the situation will improve from this point. âA stable government is good news for the sector. An unstable government was one of the reasons for a downward trend in real estate prices,â said Tata Housing Development Co CEO Brotin Banerjee.
With the market for luxury projects shrinking, developers are focusing on the lower income group. Last Friday, Unitech announced it would convert a project of luxury flats in the national capital region to affordable apartments. A similar trend has also been observed in Mumbai, especially in the cityâs western suburbs where some developers are converting premium projects into affordable ones for the lower income group.
âThe stable government should invest in infrastructure and do something about liquidity. We expect these steps soon. If they are taken, the market will be attractive again,â says Anuj Puri, MD of realty consultancy Jones Lang LaSalle Meghraj.
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