Builders Allege Upturn in Property Demands- Banks Disagree

Published: May 20, 2009

Builders seem to have reset their price expectation and it is starting to reflect in the new stock entering the market Banks say that they have not seen any change in either loan disbursement or loan applications. After six to eight months of a dry spell in the real estate space, builders are claiming that there has been a pick up in the residential property market over the last one month. The slump in the market had forced developers to cut prices, offer discounts and dangle the “affordability” tag in hope of luring buyers. Brokers and developers are now saying that April and May have turned out to be far better in terms of serious enquiries and bookings, particularly in Mumbai and Delhi NCR.

Banks, however, have a different story to tell. Admitting that they do see some momentum building up, they are saying that this demand is yet to translate into actual loan applications. According to the real estate industry, potential buyers, who were earlier waiting on the sidelines, are now seriously scouting the market for deals. This, combined with project discounts, is pulling customers to booking counters, they said. “The realty market had witnessed a near standstill in the last six months but that changed in April… We have seen transactions and booking confirmations in the last few weeks,” said Mr Samarjit Singh, Managing Director of property broking firm Agni Group. DLF recently booked 1,356 apartments (two million square feet) in a single day in a project, Capital Greens, in New Delhi. Unitech, too, said the market has seen some cheer lately. It claims to have sold nearly two million square feet of space in April alone. These bookings are spread across projects in NCR, Mumbai, Kolkata and Chennai, according to a senior Unitech executive. “April has seen a major spurt in sales. This is largely due to the affordable products that have hit the market. In the last three to four years, the builders were focusing on high-end projects but now there is a demand for products of smaller ticket sizes,” the official pointed out. Indiabulls Group – which recently launched an affordable housing project in Gurgaon – said it has already closed 100 bookings. It has launched about 200 apartments in the first phase while the project has nearly 800 units.

“We are also seeing buyers come in groups to negotiate for better rates,” said the President-Marketing, Mr Nitesh Kumar. Builders seem to have reset their price expectation and that is starting to reflect in the new stock entering the market. “This is a positive cue for end users, who had held back purchases for the last six to eight months,” said Ms Shveta Jain, National Head, Marketing & Investments, Residential Services, Cushman & Wakefield India. They admitted that they see some momentum building up but added that this demand is yet to translate into loan applications. An official of Punjab National Bank told Business Line that while they did foresee a market revival in the coming months, there has not been any material change in either disbursements or in the number of loan applications on a month-on-month basis. “This could be hype that is being created by real estate companies. But even if the market is recovering, for it to translate into an increase in loan applications will take time, as it takes nearly a month for it to get processed,” said another official. A representative of another public sector bank said with incentives such as free insurance on home loans below Rs 20 lakh, there has been a rise in loan applications in the semi-urban and rural areas. “But in the metros, the demand is still sluggish,” he added. Founded in 1986, the company is a leading real estate developer in south India with 125.17 million square feet area available for development across Bangalore, Chennai, Hyderabad, Cochin and Mysore, as on March 31, 2009.

Source: Indian Realty News

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