Indian Express 22.09.2009
Realty check: jacking up property rates bad for sales
Developers who have been hiking rates of apartments hoping to cash in on the demand have lost out — as far as sale in the second quarter of 2009 is concerne— to those who held on to reasonable prices.
The average price of housing stock unsold in the second quarter of 2009 was 56 per cent higher than the average price of apartments sold. The average price of the net residential sales in the Mumbai Metropolitan Region (MMR) between April and June is Rs 3,438 per sq-ft, while the average price of the net unsold property for the same period is Rs 5,356 per sq-ft, according to findings of the second quarter assessment of the realty market by the real estate research agency Liases Foras.
The figures show few takers for higher priced properties across MMR.
Of the total 83,000 flats available in this three-month period, a whopping 78% (65,000 flats) remained unsold. For the average homebuyer this market trend would mean a further fall in property rates post Diwali.
The report states that an increase in prices by developers when the market is just beginning to stabilise will do the market no good. Noting that even properties at mass housing locations like Thane and Mira Road have jacked-up rates, the report says, “This augurs the possibility of a slowdown in coming quarters or further correction in prices”.
Sounding a word of caution for developers, Mahesh Mudda, chairman, Builders Association of India, says only genuinely priced properties will have buyers during Diwali season. “At various foras of our organisation or the Maharashtra Chamber of Housing Industry or the Confederation of Indian Industry, we have been telling our people to understand the possible negative impact of their behaviour on the overall market at a time when the situation is beginning to improve. Maybe the slow intake of highly priced properties during Diwali will force them to adopt a more reasonable pricing,” said Mudda.
Raminder Grover, CEO of Homebay Residential, the residential arm of Jones Lang LaSalle Meghraj added that over the last few months, absorption has been the most in the mid-housing segment. “The phenomenon of developers hiking their prices in the range of 5% to 15% is seen in Mumbai, Delhi and other parts of the country. However if they don’t exercise caution and hike it too high, it would result in no absorption,” said Grover.
