Property biz hits roadblock

By Mouli Mareedu

Real estate business seems to be not as lucrative as it used to be, at least in the twin cities. The sector, which was considered as money-spinner till recently, has no good tidings to offer. It has turned out to be a nightmare for investors, buyers and builders.

A survey report reveals that the demand for real estate in and around Hyderabad has been reduced by 11 per cent to 12 per cent. One and half year ago, all domestic and international banks had huge rush in front of their counters for loans in the housing sector. As the real estate business is on the verge of a slump, some banks are hesitating to sanction loans. Majority of experts in real estate sector feel that the global changes in various sectors impacted on the Indian realty business.

"Uncertainty has been prevailing among realtors as there is some crisis erupted in Information Technology (IT), Business Process Outsourcing (BPO), US financial and banking system and aviation sectors. We considered these are the key causes crippling the real estate business," says Rakesh Talwar, country head (marketing and sales), Karvy Realty (India) Private Limited.

On the other hand, as some political parties are demanding separate Telangana State, customers are just waiting to invest hoping for reduction in prices of lands and realty. Land sellers in Ranga Reddy district, well-known for realty market, are undergoing a bad patch as hundreds of buyers have dropped their decision to purchase land. According to sources, the State government obtained approximately Rs 700 crore income by the registration of lands in 2005-2006. The income has come down to Rs 1.55 crore in 2006-2007.

Aditya Verma, business head, makaan.com told Deccan Post that as per their recent survey, majority of the people in Hyderabad prefer to purchase a house but they take time to invest because of the negative propaganda in the sector. The fluctuations in the realty are making buyers hesitate from time to time, he said.

"The slump in the realty is in commercial and domestic sectors," said Manjit Singh, vice-president, IJM India Private Limited. This situation may continue for another year, he opined. Builders have no interest in starting new projects, he said. A few prominent realty firms have decided not to start new ventures and are struggling to sell their existing property. Manjit Singh said the IJM would not go ahead for any construction in the next six months. "The government should intervene and take steps to provide home loans at zero percentage interest rate on the lines of the Malaysian government. Then only the slump in the realty business will be rectified," Manjit Singh felt.

Till 2007, people used rush to buy homes during Dussera and Diwali. This year there is no big business in the property segment. Customers rather prefer to buy a four-wheeler or any other vehicle. According to sources in the banking sector, many customers prefer loans to take four-wheeler in the festive season than investing to buy a house.P Krishna Mohan Reddy, chief manager, State Bank of India said the demand has drastically come down in real estate business. As the realty market is in various financial circumstances, buyers prefer to deposit their money in banks rather than buying houses. "In 2005, we worked additional hours to give home loans to customers. We sanctioned as many as 130 home loans per day in 2006 -2007. Now, we sanction only 10 home loans per month in the current financial year. As per the Reserve Bank of India guidelines, the State Bank also is considering to reduce interest rates on home loans," Reddy explained.

Anil Girotra, executive director, Andhra Bank told Deccan Post that even as the real estate business is in critical condition in the present situation, the Andhra Bank is encouraging customers by providing home loans. "The demand for home loans has come down and there are some bad signs as people are not showing interest in investing their money into a house or a plot. To survive the real estate market, the Andhra Bank is also planning to reduce interest rates on home loans soon," Anil said. Even as the realty sector faces hard time in the present scenario, many developers, who invested more than Rs 100 crore on construction of various projects, are optimistic and hurry to sell off their properties.

N Ravindranath Reddy, managing director, Radha Realty Corporation (India) Private Limited said even as some uncertainty prevailed around the realty business, some projects are getting good response from customers. "I think the present circumstances in the real estate may continue for a short period," Ravindranath Reddy says. Maheshwar Singh, head, DLF commercial section, Hyderabad, said the demand for commercial projects has been continuing and it was proved as the DLF commercial project sold almost all of its properties. "Even as the real estate business, especially, the residential projects struck in dilemma, commercial ventures have good demand," Singh claimed.

(The story published as cover story item in Deccan Post, english paper)