New Delhi, India -- (SBWIRE) -- 05/01/2012 -- Monthly volume has been declining for over a year now; it is already touching a nearly 31-month low, thanks to hardening interest rates and unaffordable property prices. Correction is expected in the industry, but there is another perspective to it. No increase in property prices is also a correction. The property rates have been rising but it is not corresponding to the increasing inflation rate, which is a good sign. It indicates that the prices are stabilising at their rates.
The slowdown of demand is however giving a tough time to developers because they are also facing a lot of struggle with respect to rising input cost, mainly in steel, sand and cement. Though, the project finance channel for developers, available from banks, is fully exhausted, they are resorting to structured borrowings, paying interest of 16-18%, to sustain. They are not going to let the drought in demand let their business languish.
A lot depends on the financial ability of individual developers to hold on to their current pricing and risk losing sales till the situation improves. Developers with enough capital bases are less likely to relent on their pricing than smaller developers with an urgent need to sell their stock.
On the other hand, interest rate for home loans have seen a steep rise in the last few quarters as most banks and housing finance institutions have passed on the impact of the apex bank's repo rate increase to the customers. Finance sector analysts are expecting a fall in the coming budget. SBI has already lowered its processing fee, which provides a much required sigh of relief to the genuine buyer.
Given the population of the country, housing sector may seem to have gone slow, but fundamental demand of genuine buyers still remain, that’s why most developers are still launching new multi-crore projects.
The state and central government authorities and developers are working in tandem with each other to improve the situation of the realty sector.
Brijesh Parnami, CEO- Distribution
Destimoney Enterprises Pvt. Ltd