Festival season bypasses real estate

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The real estate sector witnessing weak demand and burdened with oversupply in various pockets across the country looked up to the festive season this year to bring back some cheer. Dussehra and Diwali are behind us, and initial reports suggest that the season did not turn out as expected.

While the industry tried hard to get the attention of potential buyers by offering price discounts in some areas and also giving freebies to spur purchase decisions, buyers largely remained unimpressed and sales did not take-off. Not only did the festive season fail to bring a turnaround, there are some who are saying that it may have been the worst festive season in almost a decade.

That throws up an important question: what can potential home buyers and real estate investors expect from developers? A majority of them are are sitting on inventory that is only growing and are facing problems of even funding their working capital requirements.

Discussions with industry players and experts reveal that in the coming 6-8 months little is expected to move on account of the upcoming General Elections around May 2014 and the ongoing weakness in overall consumer sentiments. And with real estate industry witnessing an oversupply situation in various pockets, it may turn out to be an interesting phase for home buyers and there is every possibility of getting a good deal on that dream home.


It was a festive season that failed to cheer developers, brokers and other stakeholders within the sector. Industry experts and developers say that sales during the festive season were roughly around 40 per cent of what the industry had expected and that is nothing less than a disaster for the industry.

Even as developers looked to dispose of their existing inventory, several new projects also got launched across various markets to tap home buyers sitting on the fence, but that did not prove to be of any help either.

Interestingly, as the festive season approached, roads leading to Noida, Noida Extention, Indirapuram (Ghaziabad) and Greater Noida saw huge hoardings of cricketers (from Virender Sehwag to Munaf Patel) and Bollywood celebrities (Shahrukh Khan, Kareena Kapoor and Anil Kapoor) endorsing real estate projects. That star power could do little to uplift sentiments.

“It has been an extremely bad festive season in a long time may be it is the worst after the one witnessed in 2004-05. In that sense there has been no festive season for the real estate industry,” said Gulam Zia, national director – research and advisory services at Knight Frank India.

Even a good amount of discounts that were on offer failed to attract home buyers. “This festive season saw a lukewarm response from home buyers, despite the usual sales discounts and freebies. Property prices have stabilised and come down by about 10-15 per cent in certain markets of Delhi NCR and Mumbai but home buyers continued to prefer a wait-and-watch approach in these inflationary times,” said Anshuman Magazine, chairman & MD, CBRE South Asia.

Even the developer community accepts the fact. “The market has not responded as per expectations and sentiments were low,” said Tarandeep, GM-Marketing at Paras Buildtech.


The state of the real estate industry is a clear reflection of the state of the economy and the sentiments of the consumers in the country and that is currently affecting the sector the most. A depreciating rupee has also affected sales in the luxury and high-end segments as high net worth individuals and non-resident Indians are waiting for things to stabilise before they can take investment decisions.

“Due to prevailing negative sentiments in the economy, high inflation and interest rates, sales was below expectations across markets. The steep decline in the value of rupee against the dollar affected the sale in luxury and ultra luxury segment,” said Anil Kumar Sharma, president, CREDAI-NCR who added that there was some positive development on the front that new housing projects came up around the festive season.

Experts feel that slowdown in economic growth and concerns around job security have had a major impact on the sector and potential buyers are taking time to decide. They are now waiting for the General Elections to conclude and stability to return on the economic front before taking major investment decisions such as buying a home.


It has been a tricky period for the developers across the country as even a price drop of over 10 per cent in several pockets and freebies on fresh bookings have been futile and failed to attract the buyers. Industry insiders feel that there may be no major movement in the next 6-8 months.

“Builders are caught up as to what to do as buyers did not come to them even after they brought the prices down. I think status quo will be maintained till the General Elections conclude and till the time there is more clarity on growth of the economy,” said Zia.

The National Housing Bank’s Residex data that was released in September showed that the residential prices for the quarter ended June 2013 softened across the country. Of the 22 out of 26 cities that were covered by the index witnessed a fall in the housing prices in the quarter ended June 2013 over the previous quarter.

It was not only the tier I cities but even the tier II cities witnessed a correction in residential prices. Ludhiana witnessed the biggest correction of 6 per cent during the quarter while Indore and Vijaywada were next in line with prices falling by 5.6 and 5.4 per cent respectively. Prices in Delhi and Mumbai too softened by 1.5 and 0.5 per cent respectively.

While there is an opportunity for home buyers to look out for a good bargain, investors can also look at this market to make their move as they may get decent returns in the longer term.

“Unlike real estate markets of more developed economies, India’s urban sector is yet to reach saturation levels. It is also important to keep in mind that there is still significant latent housing and infrastructure demand in the country’s urban centres, which is currently being overshadowed by the prevailing uncertainty in our economic climate,” said Magazine.

Given the state of affairs within the industry, while one cannot rule out more price corrections, it may not be a good idea to wait forever. Do not expect a blanket correction in residential prices as it will only be in pockets of various geographies that are facing an oversupply situation.


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