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Construction : Exclusive Report | May 2012 | Source : Construction Update

Do you expect real estate prices to crash?

India Speaks: Do you expect real estate prices to crash?

No clear picture is emerging as far as real estate prices are concerned. There have been news reports in the last couple of months which mentions large unsold housing stock mainly in metro cities. People are expecting fall in real estate prices and Builders are not willing to budge. To find out what India Inc thinks and believes based on their market knowledge and interaction with the property stakeholders. Project Reporter has conducted a survey in April-May 2012 to understand and present what the industry and an average Indian expects from the Real Estate players.

The queries comprised: 1) Do you believe builders are hoarding housing stock to prevent price crash? 2) Would you buy/recommend buying property? Options: Prices are down by 10%, between 11-20%, between 21-30% or At current levels. 3) When do you expect real estate prices to crash? Options: in 2 months, in 6 months, in a year, not expecting a crash.

The survey findings shows that out of 437 respondents, 76% of the respondents believe that the builders are hoarding housing stock, 18% said no and 6% could not decide. 14% of the respondents are willing to buy at current levels, 49% are waiting for 21-30% dip, 26% are ready once prices are down between 11-20%, 42% of the respondents expect the real estate prices to crash in 6 months, 24% expects in a year, 9% expects in 2 months and 25% are firm that the prices won't crash.

The views of some of the respondents are provided below. Edited Excerpts.

Neeraj Gujral, Director, Innovation Chemicals
I'm not expecting the real estate prices to crash. Would buy/recommend buying property at current levels.

Amit Malhotra, Director, Asian Handicrafts Pvt Ltd
Real Estate prices have increased to a level where the actual user is unable to buy. Prices will start coming down when there is desperate selling by investors who have taken loans and now are unable to bear the interest costs. Can happen in 2 - 6 months.

Kalpeshkumar, CEO, Infra control
The price has gone very high. The buy is no value for money. It has gone very high up so price has to come to realistic level. People will not buy property. Let builder have the stock and be happy.

Harshad Jadav, Manager, Concept
I feel Real estate companies are covering up their business losses from stock exchange by manipulating fluctuations of 100% to 200% in their share prices in span of 2-3 months and then again repeat cycle may be with light or heavy intensity depending upon over all market conditions world wide. e.g. how HDIL which dropped down to low of Rs.52 climbed up to Rs.130 in just 2-3 months & again dropped down to Rs.85 Like wise you can checked for other real estate companies share values also and similar kind of trend will be found. Due to this builders are able to sustain property values and not reducing rates.

N Venkatramani, CEO, Tavas Construction Pvt Ltd
The cost of construction is going up. Hence reducing price is not possible. The land prices are not moving and stabilization is taking place. The earlier appetite of land bank is gone and it is more of buy/ JD and do the construction. All governments are increasing the guideline values and hence falling of land prices is also minimized and hence it is therefore no decrease in real estate price. To reduce the price, country has to create satellite towns, increase FAR / FSI and improve infrastructure thru better connectivity to satellite towns. Also build concept of total environment of work, play and education in the satellite towns.

Vishnu Dutt Gautam, Senior Consultant, NKG Infrastructure
Property prices particularly in Delhi NCR of Noida and Greater NOIDA are hugely balooned. The burst is likely to happen any time soon. The builders are badly bleeding. The situation has further turned bad due to change to unfavorable political party to rule the state of Uttar Pradesh. The builders will not be able to hold back for next five years when the situation is unlikely to change.

HS Bhatia, Director, Sterling Enterprises
Politicians, builders, Industrialists unaccounted money is involved so there is no way they will allow the real estate market to crash.

Mohan Lal Agarwal, Director, Chanduka Exports Ltd
Realtors are facing multiple crisis, first being burdened with the high rate of loan interest for hoarding stock to prevent the price fall but at the same time marketing their product at undercutting prices by hidding the fact from the lender and customer with whom they have marketed product taking advance in high rates. Second being the customer /investors have become aware of the marketing policy of Realtors and heading to purchase the flats in real and current terms.

E.Krishna Murthy, Senior Manager, Corporation Bank
It is high time the prices should come down. Without any justification the prices are just shooting up. Common man is not in a position to buy flat/build house at this high range of prices.

Javed, Commercial Assistant Manager, Strata Geo Systems India Pvt. Ltd
If the prices should shut down approximately i.e. 50% so that common man of this country can think to buy. If the price is 1.20 crore i.e. double the price it is more better it reaches 30 to 50 lakhs common man of this country could afford to buy 2 bedroom hall kitchen.

S.K. Makkar, Vice President, Simplex Infrastructure Ltd
Property Rates will not  be crashed as fear in the market because the demand is high than availability. Builders are holding the unsold flats as their investment. Property rates may not rise as previously but  shall remain stable/ slow pace of rise. Downward trend not more than 10-15 percent may be seen but for a vary short period. Overall  future is better.

Amol Bapat, Self Employed, Medha-Win Associates
The current prices are too high. Buying of property is a distant dream for a home seeker.

Uma Maheswara Rao, Dy. Accounts Manager, B.S.C.P.L.
Real Estate never go down if one year go down will get improve next few years just like in  2008-09 now improved in year 2010-11.

Subhash Roy, Proprietor, Roy Plastic Industries
Prices of property will crash within 6 months because there are many builders have unsold flats.

Shashank Tyagi, Quantity Surveyor, Konark Infrastructure Ltd
The real estate prices have soared with a hype generated from the developers compared to actual value of the product and banks and financial institutions have supported this cause. This artificial rise in rates so generated will not last long. As the consumer may not be able to withstand the monthly payments to be made to the financial institution. which he would have incurred for loan against property

Ashok Mirchandani, Proprietor, Malvik Enterprises
Builders have bought land at very high costs plus raw materials costs have gone up. therefore, I do not foresee prices being reduced too much. I think prices will fall within 6 months if sales further fall. It is about time the builders reduce their margin profits by at least 10-15 %.

There is plenty of money available in Mumbai, but actual buyers are shying away now that they know they have been deceived by builders charging them an extra 25% for FSI that they got free of charge. Besides, investors are not in the scene any longer; hence prices should really fall if builders are sensible.

Navnath Bhujbal, Project Head, Ishwar Construction (P) Ltd.
I do not think that prices are getting down there is the chances of steadiness in prices because currently there is the segment of budget homes still having lots requirement than the available. Currently rate of Interest on the HL is high so the new buyer just looking toward it down by RBI. After Diwali i hope all market of construction go back on normal case since due to world economy crises may the market get it down. By precautionary attitude all investors are not willing to take risk. So the construction/ real estate market will found slow but i think it will be on board regularly by  Diwali onwards.

Siva, Civil Engineer, Design & Drafting Services
Now a days anyone can become builders and construct the house only for making money. None of them consider out social factors, like environmental and climatology and engineering aspects like earthquake. So we have to give awareness for builders.

Ranjan Lodha, Proprietor, Spectrum Gems
We agree in posch areas prices will not be going down but atleast in the areas other than posch areas prices should be reduced. Common people are affectd by this as buying a home has become a dream. Another thing is builders has lot of empty flats/houses in their stock which they want to sell but are not ready to sell at some lower prices. I think holding of this stock will not maintain prices as no body knows how long it will take to get prices. At the same time holding of the stock will definitely increase the stock cost as rate of interest will further increase its cost price and it will shrink builders margin further.
I think builders should start selling off their stock at little less price so that it can help realty sector in moving although slowly but it is better to move than to stand.

Government is not doing anything for this sector so builders should unite and take some decision. This problem of sales going extremely down is faced by all the major cities of India whether it is Jaipur, Mumbai or Delhi. If current situations are carried further for long period then it is the builders who will suffer ultimately as they will not be in a position to sell their stock at some lower price due to the increase in cost and which will further effect their further growth. High interest of home loans, high market price, inflation and low flow of money is forcing the people to change their mind from buying a home atleast at the current price levels.

Chitlur Ramesh, Managing Director, Bhaskar Stationer's Pvt Ltd
The hyped prices are to come down and the real user should get the correct market price, this correction has to take place some time and by this it will be the reality and real estate will become normal.

Alok, Director, Seventy One Estates P. Ltd
Land cannot be expanded horizontally, it can rise only vertically. Supply of land is finite, but demand is infinite.So land prices will rise in long run always.

Satyendra Kumar Singh, Commercial Incharges, Simplex Infrastructures Ltd
Most of the big organisation did not increase their salary proportionate to increase in prices of different consumer oriented goods ,so demand are going to decrease, that's why their are possibility to decrease in rate of real state sector.

Rajendra Kr. Bordoloi., Site Engineer, Baruah Developer & Infrastructure (P) Ltd.
In my opinion, Real Estate Industry will be the most profit making in coming years.

Bharat Goradia, Partner, Goradia Industries
In spite of less demands and lot of stocks available in market builders are not decreasing prices and they pay heavy interest to banks and private finance which ultimately if they calculate they will be losers as interest paid by them is on higher side as compare to price they retain so it is better if they sold out at reduce rates.In long run they will do more projects.

Sandeep Sharma, Director, ASV
Prices of Property are higher because Builders are retaining a lot to avoid drop in rates. Actually like builders are having syndicate to benefit them similarly I suggest the Customers should also have a association. All people should stop buying property for 06 months in a city.

Radharaman Pareek, M.D., Immaculate Consultants
For the present real estate prices are  100 times more than the natural price escalation index, due to exorbitant land prices paid in grabbing land by few and rat race by others.

Srikrishna kumar, MBA - Power Management, National Power Training Institute
The current real estate prices are according to the market. But in coming months it will crash down, as there is slow growth rate is projected by IMF and many rating agencies.

Vinit Jain, Direcctor, Bohra Group
I feel the market is about crash in a year , mostly due to ineffective policies of government and its corruption image, Metros are going to take more beating.

Pradeep Kumar, CEO, Bluecode Corporation
We are consulting on many key areas of Real Estate and have well established software in this sector. We feel that the prices are controlled by builders and lobbyists and it will be the reason for the market to stabilize by corrections in near 6 months.

Samir Mehta, Head Projects Execution, L&T Realty
Due to Economic recession and the policy paralysis by the central government, economic growth is subdued. A few percentage point decrease in CRR and rate cut will not boast the real estate market. For a market to thrive, the rate cut has to be significant and most important the buyers should be able to afford the pricing of the apartments/flats. With recessionary pressures and inflation, salary hikes are going to be in single digit which in turn will affect affordability.

Charudatta Shah, Proprietor, Vardhaman Engineering
Small time developers have already started selling off their in process / uncompleted projects. Present prices are artificially increased and I personally feel should come down by 50%. It does not meet the std of construction / quality for the cost they are asking for.

Austin George, Chief, Asharam Engineering & Fire Stop Systems (Pvt.)Ltd
Ya it's really tough to buy property in real estate,how can a common man buy property in present condition when prices of property is higher,home loan interest rate is higher, government is also not giving any compensation to buy such property, sarkari log aur builders chandi kaat rahe he aur hum common man sirf dekh rahe he uar kuch nahi.

Srishanth Reddy Nukala, Managing Director, NSR Infra Developers
All ready Last 3 year Realty Industry Facing Lot of Crash in Hyderabad, I saw last 5 months a nearly 10-20% Growth at Hyderabad, Lot of investors are looking for this is right time to invest They Hard Earning Money on Properties (REAL BUYERS).

N S khamesra, Director, Vimal Chrome Pvt Ltd
The demand and supply  factor  is applicable in the  same way as last time,  the  price  of real estate  increased  in almost  more than  double  in last  four  years, so the  property is out of reach  from  mass of the   bigger  chunck, its  almost  unaffordable   for  majority of  peoples and at other hand  price  escalate  so  builders  are  making  more   space  for selling  , hence  the supply is more, only few buyers and that's why surplus is there one can not hold  more than a year

K M, Director, Sai Ram Real Estate
The land prices are down but land owners hold it unwilling to part. but can not hold for a long but to sell to market low price. the new guide line value does not hold good

Kariyappan, CEO, Sree Padmavathi Granites
Real estate price may come down or crash in short period 1-2yrs because the existing prices are saturated and gone max. level. Supply increased & Demand is coming down in all major cities in south India.

Sanjay  Sonie, Gen. Manager, Retail
The repayment cycle of Investors ( Incl. Politicians, Beauracrats) who has stay put invested for so long , need to get their money back now. The pressure to repay is mounting and same should result in cutting down / slashing prices to clear piled up inventories.

Ramesh Dhiman., Dy. General Manager (E&I), Green Valliey Industries Ltd. MAX Cement.
For long time they cannot hold for long time money needs rotation.

Hiren, Engineer, LRC
Most of finance by politician , MLA, and gold/ diamond merchant blackmoney , so they have good holding capacity. seel the unit on demand price ,by holding increasing the property price with help of currupted babus

Mahender Singh, General Manager- Human Resources, Grand Polycoacts Co. Pvt. Ltd
The prices of property have gone high beyond the reach of common man. When cost of all the essential commodities are going high, a common man is finding it difficult to have his both the end meet. The stock of the constructed property of the builders has gone as much high as 40% in some of the cases. Builders are not cutting the cost and rate of the property due to their strong sustainability in holding the stock of the constructed houses. They have already earned that much to sustain this demand and supply ratio for some time. But seeing the present conditions, when 30 to 50% of the properties in most of the cities are lying vacant/unused and unsold, it will be difficult for the builder to continue holding it back and the rate of property are definitely going to fall within a year of so, I suppose.

Kishore Singh, Marketing Head, Akansha Enterprises
It is artificial hike of the price entire world is in recession and all the sectors in India is below expectation level ,industry growth is weak ,sensex is going down regularly above all banking sector has tightened the loan issuing due to job insecurity in the private sectors. Then how can transaction be done so real estate price will definetly going to crash very soon.

Naveen Shukla, General Manager, ITAD
Government should stop people from making investment in this sector as Housing is essential commodity. Some people have 3 to 5 flats whereas a needy person retires without being able to build a house for himself.

Venkataraman, Sr.Vice President, Orizx Auto Infrastructure Services Ltd.
The syndicate of builders & brokers/ consultants r hoarding properties. A regulatory body needs to b formed that should ask every builder to disclose details of flats booked together with buyers address. This move will ensure false price escalation don't happen.

Rajan Malhotra, Regional Manager, L&T
Property prices may not escalate fast, but for projects which are correctly/reasonably priced, prices will escalate and buying good property at these levels is definitely fine, both for investment and usage purposes, specially in metropolitan cities like Gurgaon/Noida

Jignesh, Manager, Samsung Engineering
The builders are just creating the hype of property price rise. In fact the property prices are 10-15 % higher than market values. The GDP growth is down, inflation is on top, Liquidity pressure high, in this scenario price must fall,if builders want to survive(Specially Small Group).

Indrajeet Mandal, Area Liaison Supervisor(East), Eastern TradeLinks.
Now, as per the prevailing economic, social & infras conditions towards aggression & dispersion, I'd prefer to comment that in a few years property prices are going to improve as social life is disintegrating & unspent money is coming large in the hands of a few for which definitely a surge in valuation is definite. Govt. is planning to spend large on infras-investments,with added hindrances from Human Rights previews, for which land scarcity is growing. Economic Greenery is on cards instead of forestry.Man ,material & Labor welfare tactics are changing with added professional charges.

Sanjay, Director, RTS
There is significant inventory of commercial and residential property either build or under construction that is deliberately slowed down during construction process that creates artificial scarcity. The builders lobby is hand in glove with political authorities.

There needs a protection for buyers of property who are left high and dry in absence on any regulation for builders. Only well funded and capitalized builders must be issued permit and heavily penalized financially and with jail terms for failure to meet timelines or cheating the customers.

Brahmanandam, General Manager, Kar Na Sree Developers & Builders
To promote construction, raw materials cost should come down.  Both Central and State Govts. should promote certain concessions for all classes of society at least to 30% real financial assistance, subsidy, or at least waiving of 3 to 5 % bank interest rates. It will boost employment opportunities particularly both in rural and urban areas. New trends of low cost technologies to be imported/ inventions / to be brought into the construction industry. Agglomeration be discouraged in metropolis and cosmopolitans to avoid transportation, water, traffic, housing and other associated problems. If necessary to compensate such victims with some concessions. Authentic surveys to be carried out all over India especially in cities and semi urban areas separately for the issues comprising of classification of the income wise families and their number with sex, accommodation facilities, their percentage  share of income for housing.  It should be carried out both for commercial establishments other than Govt. agencies. Finding out the possibilities of shifting  to  less density areas. Restriction of 4 wheelers too many numbers in a family to avoid traffic. Or abolishing 4 wheelers in certain traffic congested areas. It should be must.  Encouraging Volvo buses in such areas for higher income people to avoid congestion of the traffic.

Naveen, Sr Managing Consultant, IBM
Most of the real estate bookings are 2nd, 3rd or even 4th property. First time buyers are very few. Rental ROI is very low, with more (physical) supply will dip even further, as most of the projects kicked off in 07-08 launches the possession is being offered now. Do not how long will this bubble sustain. It has seen interest rate fluctuations, global property melt down and DTC scare. With so much of KYC and other tax related information with the Government, wealth tax scare is most likely to cause a crash. As the cost of owning a non earning property will hit the individuals.

Nair Manojkumar Kmg, Asst Civil Manager, L&T
I expect that the prices should crash down ,because the common man is already burdened by govt norms and increasing fuel and commodity, taxes etc. It is the role of builder to support the common man so that their projects are sold in time, because timing is very important. The builders should not wait for the transfer of BMC commissioner, as already the projects are delayed by 5-6 months.

Rajesh, Owner, Gr8 infra
There are no reasonable penalties on builder for delayed possession, majority payment are linked  to frame construction and builder recover most of cost  at this stage,finishing takes much longer but builder has collected most of the payment before.
The prices have escalated so much that it has out beaten normal inflation, builders are jacking up the price but there is no buyer  in resale or builders do not offer flats from resale stock and reseller data is also not available

Manish Baghla, Sr Manager
Real estate has become unaffordable to even middle class. Someone having a saving of Rs 30-50 lacs and ability to afford Rs 1 Lac as monthly EMI can think of investing in modest 2 BHK in metros. This limits play to limited set of individuals which in my view is unsustainable.

M K Singhal, Director, Eclipse Systems
I believe that abnormal rise in property prices during last five years is artificial and due to faulty prices.

Rohit Pansuriya, Manager, Hilti India
I don't think any crash inn real estate prices in coming future.. It might stay stagnant for some time but will not crash

D Prasad, AVP, IIIE Ltd
Real estate grows in parallel to Indian economy. Day by day urbanisation is growing. hence there is no question of crash in real estate. It may slow down for a year but again it will grow. comparatively Indian prices are lower than global prices.

Mukesh, Owner, Truebell Overseas
Prices for housing and commercial bound to crash within 2-3 months in NCR, down trend is already seen, buyers are few, group housing and commercial is available in abundance, so prices bound to crash once developers release stocks.

S.Ravi Kumar, Proprietor, Team One
The prices of property has not come down in spite of the recession world over and the builders with substantial margins are able to hold on to the price. which they were quoting few years back. The land procurement were done much in advance at a very nominal price and the builders calculate their offer price at the land price which is prevailing at the time of offer. Prices have to come down to revive this slumbering giant of an industry to tap the potential and then the buyers will also benefit, which in turn will increase the demand for residential product.

Pradeep Tiwari, Associate Vice President, Topworth Group
Since the stock market is performing below par the investment is diverted to real estate.The off take in real estate is already low and as such I don't think there will be a correction in the current prices in real estate.

Akshat Jain, Director, Unomech Engineers Pvt Ltd
I feel that the property prices are too high and beyond the reach of many individual, if the builder are planning for mass housing schemes then they should also think in terms of how the  masses can buy the property

Dilip Bharade, Director, Raghukul Constructions Pvt Ltd
My views are based on the current market status at Nagpur and that to for core locations of the city where availability of land is now difficult.

Navratan, AVP, Sterling and Wilson
Speculation of such type when the World economy is in bad shape may burst the bubble. We have high interest rates, low liquidity and an uncertain future looking at us.

Nikhil Bhave, Proprietor, N B Traders
The prices have sky-rocketed in last 4-5 years, due to FDI in real estate and easy funding available to builders from banks/financial institutions. What can be the other reason for prices tripling/quadrupling? The construction costs will go up in percentage and not multiples. With no pinch in cash flow due to easy access to funds, builders can still hold on to the prices

J J Negandhi, President, Redline Automotive Pvt Ltd
Prices, particularly in metros like Mumbai have reached to a peak level. at current prices, builders as well as investors are holding tight. there are some genuine inquiries for self occupation. but at current level, investors are not keen investing further.

Pompanna, Vice President, Prithvi Group
Following down fall trend of GDP, demand for residential buildings is on decline. the prices are anticipated to crash down  within 6 months.

Geetha, CEO, MGK Mines India
Due to sudden Govt's guide line value and registration terms came in to a line where people are having rethink to buy a house or Gold, and feeling rented houses may be better and also planning to go far away in future and may invest in lands where they can go after several years, in  this case they a have land, city rented house with all infra.some amount they can invest in Gold and it will always worth , if after several years they want to build a house in outskirts this gold with help them.

Rupesh Dharpawar, PMP, Manager Project Control, Afcons
More than 80% of houses in cities like Mumbai are purchased with investment purpose that it self shows the rising prices may be fictitious as there is serious lack of genuine resident oriented buyers in market. Although there are factors like increase in population and shortage of land but still a price rise of more than 15-20% in ongoing construction within a span of 3-4 months is somewhat eyebrow rising for me.

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