Mumbai: While the Sensex's bear run with a cumulative fall of more than 700
points in the last two working days is giving investors and financial
establishments sleepless nights, the impending global slowdown could
actually be good news for home buyers.
There is an overwhelming consensus in the city's real estate community
that the downgrading of America's rating and the subsequent tumble in
global stock markets will give builders just the excuse they needed to
do a course correction in prices to counter flagging sales.
The result? Realty prices in the city may see a 20 per cent fall across
the board in less than three months. The situation would be similar to
the 2008 slowdown, when builders had slashed prices by 30 per cent to
attract buyers.
And there's more good news: The 20 per cent reduction in prices is likely to stay for at least a year.
Paras Gundecha, president, Maharashtra Chambers of Housing Industry
(MCHI) said, "The realty market seems to be headed to a situation
similar to the one in 2008.
Sales are slow as it is and builders have already started giving
discounts to counter the gap in demand and supply. A correction of
nearly 20 per cent could be upon us soon."
Gundecha attributed the slump in sales partly to decisions taken by the government and the RBI.
"Home loans have become costlier, clearance of files has become slower
and the DCR amendment (charging the builder for free FSI) has been the
icing on the cake. All these factors have adversely affected market and
buyer sentiment," he said.
Manohar Shroff, secretary, MCHI-Navi Mumbai said, "Things don't seem very rosy with the new changes in the real estate market.
The slowdown and the market collapse have affected sales and prices are likely to fall or remain stagnant for some time."
Experts' take
Pankaj Kapoor, MD, Liases Foras, a real estate research firm, said, "A
correction was bound to happen and the excuse of the American slowdown
is apt for builders, just like the 2008 Lehman issue was.
The prices will come down by 20 per cent in the next two-three months.
But, unlike the 2008 collapse, when the realty market recovered within
eight-nine months, the market should remain stagnant after the
correction for at least a year or two this time."
Explaining the reasons for this, Kapoor said, "Investors are shying away
from the market, forcing builders to target the end user.
And, to sell their flats to end consumers, they need to understand their
budget, which is way lesser than the prices being quoted by builders
currently. They are, thus, left with no choice but to reduce the
prices."
Anuj Puri, chairman, Jones Lang LaSalle, a real estate consultancy firm
said, "The US credit rating cut and uncertainties about Europe's debt
situation is a cause for concern.
These, coupled with the reduction in foreign institutional investment
(FII), including in real estate, will affect the overall market
sentiment, leading to a decline."
Market Voices
The effects of the US crisis on the Indian markets will not be
immediate. The US markets will be closely watched and the impact on our
markets will only be visible by November. Employee lay-offs are not
likely to be an immediate effect of the financial crisis in the US. --
Mark Fernandes, president, Indian Merchants Chamber.
(Note: The rates will vary with proximity to station or highway. Base figures courtesy Kkarma realtors)Indian companies are bound to be affected by the US financial crisis.
With the market going through a rough patch, lay-offs are unavoidable,
especially in the brokerage sector. --
Nishidh Shah, broker.
The US financial markets won't have a major impact on the companies. We
don't foresee any trouble. However, all necessary precautionary measures
are being taken. --
RIL employee
