CHENNAI : Builders and realty consultants feel the Indian real estate sector is in a recovery mode. But sales figures have not been all that encouraging for builders even during this festive season.
Despite the Union government making the right noises with pro-business policies and rolling out a pro-market budget, realty sector has been slow to recover, said country head of international realty consultant Jones Lang LaSalle's Anuj Puri. Demand for apartments exists in most markets, but sale is being held back by various economic factors including a natural lag between the announcement and implementation of government policies, said Puri.
Both buyers and builders follow a wait and watch policy. Buyers are biding time, perhaps waiting for RBI to ease interest rates, builders to drop prices and employment generation to pick up. Reduction in price may push sales in certain micro markets. But builders, sensing demand waiting in the wings, are reluctant to slash prices. Those with greater holding power want to wait till sales picks up. Some are offering selective discounts. One builder in Chennai has offered free power for five years to all new apartment buyers, another has offered gold coin and yet another deferred payment options.
Just four years ago, Chennai's real estate market recovery was a talking point when it bounced back from the 2008 economic slowdown within 18 months. All other major markets like Bangalore, Mumbai, Delhi and Hyderabad took longer periods to recover from the 2008 slump. The city's inherent strength has been that almost 85% of buyers are end users. But these end users are reluctant to invest their money now. Builders, of late say that inquiries have picked up. "Increase in inquiries is certainly a positive sign. But our experience is that a buyer contacts at least 10 builders and a lot many consultants before finalizing an apartment. The problem in the city is that of oversupply, especially on Old Mahabalipuram Road," said a city-based builder.
Slowdown of manufacturing sector and closure of Nokia and many electronic hardware units in Sriperumbudur have rendered several thousand people jobless. The IT market is also subdued, said N Hariharan, head, commercial wing, Cushman and Wakefield, a realty firm. Unless the state comes out with incentives to attract IT and investments, the sector will lag, he said.