AFFORDABLE HOUSING STOCK PILES UP - CAN BUILDERS AFFORD IT?

about 12 months ago
No image

 

Anoop and Aarti are starting a new life and are looking for their new home. Urvashi and Raj have lived in a joint family for 5 years and are scouting around for a home. Shilpa and Virendra want to move to a bigger home as their family has grown. Abbas is looking for a second home, a place in Mumbai where he can invest his surplus NRI money.

All these people are at different stages of their lives, different income groups and all are looking for a home in Mumbai. Yet, no one seems to be buying. All are waiting – waiting for the prices to come down and waiting to get the best value for their money. Builders are also waiting – for the market to revive, waiting for NRIs, and waiting to sell the existing inventory.

Thus not just Mumbai but entire country's realty is today a game of waiting. No one seems to be budging but it is now teetering on brinksmanship. Who will blink first is the question.

This new wave of 'affordable housing' came in and every builder worth his name in salt wanted to build one. The result of that mad rush today -  as per a report put out by Anarock property consultants, some 2.37 lakh units priced below Rs 40 lakh across top seven cities remained unsold as of the second quarter of 2018. And this unsold property is only of organised sector private sector builders. If one were to consider the unorganised, one-building kind of smaller builders and the govt housing schemes, the numbers would easily be in the vicinity of some 4 lakh odd.

Will the prices come down? The builders, small ones might probably not be able to hold on to the current prices; they might not bring down the prices but might short change the buyers by cutting down the quality of the property, in terms of amenities. Or we might see ‘negotiations’ wherein 25% upfront payment might get a lower rate or something to that effect. And the big builders? They have immense holding power. Yes, they too have debt on which they are paying huge interests and prices have come down but people expect that prices will come down further.

When the 2008 Lehman crash happened, Dubai realty crashed and today, many projects are abandoned, prices down by over 50% and those which are built and ready to move-in are ghost towns with no buyers. This can never happen in Mumbai as demand is simply too huge. Even a 15% price correction will bring in buyers by the drove and the excess inventory will vanish within the wink of an eye.  

Today also the builders are having the last laugh; their profits margins might not be 80 to 90% like earlier but it remains above 40%. Which other business can boast of such margins, that too in such difficult times?

Popular Comments