Mint has a couple of good articles on the denial of the Indian builders to accept the reality of a slowdown. The Sensex has crashed 50%, midcaps 60%, small caps 70% but India real estate developers think that the word correction applies to everyone but them. Like Marie Antonette said "If you don't have bread, eat cake" the Raheja's are pricing villas for 6crores. God save the ostriches. The articles are below
Mumbai: Bhav gira kya (Has the price fallen)?” the prospective buyer asked.
“Bhav chada hi nahin girne ke liye (It needs to rise before it can fall),” came the stoic response from across the counter from the Housing Development and Infrastructure Ltd, or HDIL, representative.
“Bhav chada hi nahin girne ke liye (It needs to rise before it can fall),” came the stoic response from across the counter from the Housing Development and Infrastructure Ltd, or HDIL, representative.
That exchange more or less sums up the current dynamic between discount-seeking buyers and reduction-resistant sellers in India’s real estate market, a chasm that was apparent at Property 2008, the 13th real estate and housing finance exhibition, a four-day event held last fortnight at the Bandra-Kurla complex in Mumbai.
A dozen signboards outside the site of the expo screamed, “Take the right decision. Buy now”, but buyers seemed indifferent to that message, even though they flocked to the exhibition in droves on Saturday.
Even as analysts caution that the days to come will be critical for developers as their inventory of unsold houses increases, real estate firms put on their bravest faces at the exhibition and said they wouldn’t consider reducing prices.
Under pressure: Real estate development in the country, including housing projects such as this one in Ghaziabad, is heavily dependent on population migration due to rapid urban growth. Harikrishna Katragadda / Mint
Everyone has got it wrong, they insist. “Make up your mind, this is the right time. The economic cycle is maturing and, by January next year, apartment prices will go up,” said Vinod Manwani, marketing head at the Nahar group, which is developing more than 100 acres in the heart of Mumbai, near Powai lake.
Analysts say real estate firms aren’t helping themselves with this attitude.
“The current slowdown in demand for realty, coupled with declining internal accruals and reduced funding options, exposes them (real estate firms) to the downside of this aggressive strategy; there are large amounts of debt already on their balance sheets and, (with) external funds increasingly hard to come by, we foresee delays on their many ongoing and planned real estate projects, thereby leading to the possibility of sale of projects or even enterprises,” said Akash Deep Jyoti, head of corporate and government ratings at Crisil Ltd, a Standard and Poor’s company.
A report in Monday’s The Economic Times said banks and finance companies have begun pushing developers to sell cheap.
To make matters worse, many companies have borrowed from outside the banking system at much higher rates.
The best way out is for them to sell assets and offload completed projects, said Jyoti.
Builders also need to get realistic on pricing, as a significant correction is yet to happen, added Jyoti.
A dozen signboards outside the site of the expo screamed, “Take the right decision. Buy now”, but buyers seemed indifferent to that message, even though they flocked to the exhibition in droves on Saturday.
Even as analysts caution that the days to come will be critical for developers as their inventory of unsold houses increases, real estate firms put on their bravest faces at the exhibition and said they wouldn’t consider reducing prices.
Under pressure: Real estate development in the country, including housing projects such as this one in Ghaziabad, is heavily dependent on population migration due to rapid urban growth. Harikrishna Katragadda / Mint
Everyone has got it wrong, they insist. “Make up your mind, this is the right time. The economic cycle is maturing and, by January next year, apartment prices will go up,” said Vinod Manwani, marketing head at the Nahar group, which is developing more than 100 acres in the heart of Mumbai, near Powai lake.
Analysts say real estate firms aren’t helping themselves with this attitude.
“The current slowdown in demand for realty, coupled with declining internal accruals and reduced funding options, exposes them (real estate firms) to the downside of this aggressive strategy; there are large amounts of debt already on their balance sheets and, (with) external funds increasingly hard to come by, we foresee delays on their many ongoing and planned real estate projects, thereby leading to the possibility of sale of projects or even enterprises,” said Akash Deep Jyoti, head of corporate and government ratings at Crisil Ltd, a Standard and Poor’s company.
A report in Monday’s The Economic Times said banks and finance companies have begun pushing developers to sell cheap.
To make matters worse, many companies have borrowed from outside the banking system at much higher rates.
The best way out is for them to sell assets and offload completed projects, said Jyoti.
Builders also need to get realistic on pricing, as a significant correction is yet to happen, added Jyoti.
Bangalore: Real estate entrepreneur Vijay Raheja has lined up a raft of projects in Mumbai and Bangalore for the next six months to a year—braving a slump in the property market after splitting the family business with his brother in July—and started with a development targeted at the rich. His company, V Raheja Design Construction launched its first project post the split on Dussehra—the Verena luxury villas spread over five acres in east Bangalore’s Whitefield neighbourhood where each unit has been priced at Rs6 crore. Exclusive: V Raheja Design took over construction of the new JW Marriott hotel at UB City in Bangalore in July. Hemant Mishra / Mint“There are 40 villas, and all will be sold by invitation. Other residential and commercial projects will be launched gradually,” said a senior official at the company who manages the Bangalore operations, but did not want to be identified. Raheja is working on projects including an IT park, Gigaplex, a residential project, Buena Vista, and a commercial property, Raheja Chambers, in the city. In Mumbai, an information technology park is under construction. Raheja and his younger brother, Deepak, split the 56-year-old B Raheja Builders between themselves and founded their own companies, ‘Mint’ reported on 7 July. The properties and projects of B Raheja Builders were divided between the brothers, with V Raheja Design taking over the construction of the new JW Marriott hotel at UB City in Bangalore. “A Rs6 crore villa is overpriced where builders are unable to sell Rs3 crore houses in the same area,” Naresh Dandapat, regional director (south) at property consultancy Knight Frank India, said of the Verena villa project. But the official defended the pricing, saying, “They are exclusive and contemporary, and have been priced accordingly.” Analysts say builders need to get realistic about pricing, sell assets and offload finished projects
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