A report by international real estate consultancy, Knight Frank said, “the construction activity has been hampered across India. Delay in approvals, high cost of funds and slow uptick in the sales volume dried up the liquidity for the cash-starved real estate companies, which in turn ‘log jammed’ the construction activity across India.”
The report is based on sales figures of 25 listed companies of which seven are from north India, 13 from west India and 5 from south India.
Talking to this correspondent, Dr. Samantak Das, Chief Economist & Director, Research, Knight Frank India said, “while there are signs of economic recovery across cities, these are overshadowed by political uncertainty.”
Sales are down and there is no confidence, Mr. Das said. “With no customer advances, banks shying away from financing and private equity funds having burnt their fingers, developers are cash-strapped.” “Further, high input and labour costs have hit operating margins while higher interest costs affected net margins.” According to the report, Northern India saw sales dip 57 per cent even as housing prices rose 21 per cent over eight quarters. “The outlook for sales volumes remains dim, compelling developers to shift their targeted milestones by at least two to four quarters,” the report said.
In western India, unaffordable prices and execution risk brought sales literally to a grinding halt and average residential prices in the region rose 16-17 per cent over the last eight quarters.
However, in South India, as affordable prices, an end-user driven market and comparatively less leveraged balance sheets led to a better performance, sales grew 4 per cent to 3.92 million square feet. “We expect that post-elections with a stable government likely to be in place, there could be the requisite positive sentiment to buoy up the realty market starting with residential and then commercial,”Mr. Das said.