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Realty takes the reality bite


 
04.11.2008

Realty takes the reality bite


 

NEW DELHI: With Diwali having come and gone and no increase in sales in the real estate sector, it now seems certain that developers will be forced.

to reduce prices at least in the residential segment. The biggest reason for concern for all real estate players is that a number of private equity deals did not materialise.

This is coupled with isolated or barely any property changing hands this festive season. In fact, many desperate developers had offered major freebies — ranging from consumer durables to luxury cars — but it seems nothing worked. And now developers who had taken huge loans from banks would be forced to reduce the prices so that the end users come back to the market.

In fact, in various markets, despite a slowdown in demand, essentially from the end users and speculative investors, developers will be looking at reducing rates further by 10-15%. Some have already started offering the lower rates.

“All the developers have tried to use the freebies route but nothing has paid off. In many residential projects not a single apartments has been sold. We may have to offer a 10-15 % discount soon to bring the end users back to the market,” feels CMD of a leading real estate company on the condition of anonymity.

Sales in secondary markets have also taken a beating with very few transactions taking place at relatively lower price points than market expectations.

Says Anuj Puri, chairman & country head of Jones Lang LaSalle Meghraj: “It was unreasonable for the promoters to hope that the Diwali season would somehow pull the real estate market out of the doldrums. The situation is a result of deeper economic issues. Currently, the equity markets in India are in a rather low phase and credit is extremely tight, resulting in the Indian real estate sector taking an unprecedented body-blow. We expect domestic demand to sink by another couple of degrees and international interest to remain at cautious levels before the situation gets better.”

Industry sources, in fact, say that across all metros and tier II cities such as Mohali, Pune, Kundli (Sonipat), Chandigarh, Jaipur, Lucknow, Indore, Surat, Ahmedabad and Cochin there has been an estimated 80-90% drop in the number of deals. The situation is so bad that there are no buyers for any kind of residential real estate in these markets.

Many feel that it will take at least couple of years before the realty market witnesses a turnaround.

Says Sanjay Verma, executive MD, South Asia, Cushman & Wakefield: ”Once real estate prices sink to more realistic levels, the watch-and-wait stance currently evident on both the domestic and international investor fronts will give way to cautious forays and eventually to steadily increasing market recovery. The turnaround phase should come in another 18 months to two years.” 

Компания "SV Development"