Overheating of real estate prices in the northern parts of the country, liquidity crunch among developers and a watch-and-wait stand among property buyers has been resulting in a slowdown in the real estate sector of India, says Anuj Puri, Chairman and Country Head of Jones Lang LaSalle, a consultancy firm. Experts point out that these trends will continue in the Indian real estate, especially in the residential sector, which has seen the highest price appreciations and is the most sensitive to non-amenable lending norms. Major real estate developers who have access to private equity and IPO-based money, further supported by pre-sale monies and land banks, will not be as seriously affected as smaller players. They will not offer substantially reduced rates as they have prolonged holding capacities.
Small firms who have projects under construction will have difficulties in bringing these to completion. Some real estate developers in certain areas may sell their products at lower rates, or choose to sell to speculative investors in bulk, at marginally discounted rates, Puri says. Many buyers who were in wait-and-watch mode may continue to postpone their intended property purchases.
Residential real estate developers in India will begin to look more seriously at incentivized formats such as townships, while office property developers will consider the SEZ option. The extension of the STPI scheme by one year is not significant enough to make much of an impact.
India continues to be a boom country, but the boom is now assuming the properties of a controlled and focused explosion rather than the free-for-all market mayhem it previously stood for.
Property prices are stagnating and there may be a correction in many areas over the next one year. This, again, is not a blanket evaluation, and factors like specific location sector and property typology will play a significant role.
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