Friday, 18 November 2016

Rising costs limit builders’ ability to act on RBI Governor’s call to lower prices

The real estate sector across India is witnessing an inquisitive paradox. Builders and promoters are facing a pile-up of inventory and are under pressure to lower prices – most newly from RBI Governor Raghuram Rajan. But they find themselves unable to lower prices even to in centivize sales because of high construction costs arising from liquidity issues, and delays in obtaining approvals.

Most of the developers are running high debt, and servicing that is eating into their wafer-thin margins. I don’t think there is any room to cut prices further.

The call to developers to lower prices came in the context of a turn down in housing demand in the recent months. A survey for July-December 2015 put the unsold inventory across India at about seven lakhs housing units. The survey covered Bengaluru, Mumbai, NCR, Pune, Chennai, Hyderabad, Kolkata, and Ahmedabad.

The market is a fraction of what it was in the finest of times. In the residential segment, launches and absorption failed to impress, although there has been a marginal increase in transactions.

Prestige Group has announced the launch of a pre-launch property on the Bannerghatta Road and is known as Prestige Elysian.