Why real estate may not crash?

Q: Actually, the real estate sector has been stuck with high inventories and faced a liquidity shortage for at least 2 yrs now. In spite of that prices have not fallen.

Surinder,

3rd August 2015

Real estate News in Mumbai

real estate

godrej properties

black money

real estate in mumbai

tata group

mahindra group

knight frank india

bharti realty

nbfcs

Follow Discussion

Also see discussions for

Mumbai Real estate News Real estate News in Mumbai

Replies (3)

Hey Supratim,
Seeing the present situation of the market i can say that this might lead to a huge change in the country's real estate market. Still, large builders have stayed away from it. The reasons are crystal clear and that is cash transactions involved in the business. But now you might experience that they see an opportunity in the large number of projects that have got all clearances but are stuck because of the lack of funds.

Kunal,

3rd August 2015

Comment

This is because, the builders have lost buyers trust. They are looking for projects that are backed by small corporations not from brand name and builders. And that is where business houses like Tata, Godrej, Bharti and Mahindra have the opportunity.

Dharmaja Patel, Mumbai

3rd August 2015

Right Sonya,
Builders have many options. Many builders who have not been able to sell apartments have simply stopped construction, rather than take debt to complete their projects. Therefore, a majority of projects are behind schedule. Buyers are helpless. Some builders had offered to pay penalties in case of a delay, but the promise comes loaded with so many riders that buyers somewhat get paid.

Supratim,

3rd August 2015

Comment

Those builders who are highly gripped do as expected have a problem in their hands. Because of their nature, banks had turned their back on them long time ago, NBFCs and private lenders have also started to say no to them. It is seen that most of the builders in this category are those who are into commercial real estate as well, where pre-sale does not happen. Such projects are financed out of debt.

Dharmaja Patel, Mumbai

3rd August 2015

I a agree with you Dharmaja,
Because of that these builders are now desperate. Some of them admits that they are overload with request from those in difficulty to buy their projects. It is, after all, a buyer's market. Those who have the money will pick their projects. Builders have come into a situation where they have interact with each-other who are unable to complete their projects.

Supratim,

3rd August 2015

Yes Surinder,
There has been some correction seen in the market, but there is no evidence of a crash. That is because a sizeable number of builders are not highly leveraged, and can therefore afford to sit on unsold stock for some more time.

Supratim,

3rd August 2015

Comment

@Supratim,
This is how residential real estate markets works in India. The builder pays for the land and then sells the project. With the money paid by buyers, he carries out the construction. The only cost he has to pay out of his own pocket is the land. And if he is a serial builder, he will buy the land from the money he raised for earlier projects and there is no monitoring of these funds.

sonyarai,

3rd August 2015