Hyderabad Realtors adopt desperate measures to Offload Units

Concerns have been raised by realtors regarding the prevailing scenario in the Hyderabad realty sector. With prices of residential property down in the dumps in recent times, realtors have adopted desperate measures to tide over these troubled times. Many developers have dropped rates on slow moving residential apartments by upto 30%, and are considering a further drop by 10% so as to offload some of their surplus supply.

Credai allays concerns of realtors:

In a move to allay the concerns of realtors, the Andhra chapter of the Confederation of Real Estate Developers Association of India (Credai) has stated that the situation though grave, does not warrant desperate measures to be taken. The President of  Credai, Andhra Pradesh felt that such measures were taken largely by realty developers in the unorganised sector to cash in on the Telangana fiasco, while there was more stability in pricing by developers in the organised sector. Realty players in the organised sector are more upbeat about prices rising in the immediate future. However, Credai is of the viewpoint that prices are likely to stablise only by the beginning of 2015.

Private equity players show disinterest:

The disinterest shown by private equity (PE) players in Hyderabad realty can obviously be stated as a cause of concern. In the present scenario, the Internal Rate of Return (IRR) expected by private equity players is about 25-30%, which is beyond the realms of reality. Moreover, the industry has reached a stage where it is impossible to compromise on prices any further, as margins of developers will not be met. Another cause of apprehension is the fact that funds from banks and in-house capital is presently not readily available.

Agitations stall progress of realty sector:

The agitations related to the Telangana imbroglio which started in 2009 has boiled over to the realty sector as well. Coupled with the global economic slowdown, it resulted in a considerable slump in the realty sector of the city. With the impasse finally having been broken with the proclamation of Telangana as a new state, the sector is finally set to regain lost ground. However, with agitators making a last ditch attempt to sabotage the process of statehood of Telangana, it would take some more time till Telangana is formally declared as a state, and normalcy is restored. Hence, it is expected that it may take about 2-3 years for the realty sector to stabilise in the region. In such a scenario, no investor worth his salt would be willing to stake huge amounts in the sector. Besides, banks have also refrained from lending to realty promoters, forcing them to resort to borrowing from private lenders with high interest.

Unorganised sector and major builders hold forte:

Even in such adverse circumstances, many multi-storied project developers have managed to stay afloat due to the pan-India marketing strategy employed by them. As disclosed by the executive director of a leading property developer, even during the most raucous times, they were able to sell about 300 apartments annually on a consistent basis since the past four years. Most of the company’s customers were sought through references from existing customers due to the goodwill factor. However, it was players in the unorganised sector who held forte to garner a 60% share of the market.