Tuesday, December 16, 2008

The future of the real estate sector lies in providing affordable housing

The focus has shifted from luxury or premium category apartments to smaller, no-frills affordable houses

Around 70% of the Indian population comes under this category of housing. Companies like Omaxe and Puravankara Projects formed subsidiaries to focus on this part of the business.

An upsurge in demand is the only saving grace for these builders. This is what prompted the RBI to declare low-cost loans as priority lending. Developers with projects in Tier-II and Tier-III cities are expected to benefit from this move.

Mumbai real estate market:

Mumbai’s real estate market is a different ball game compared to the rest of India. Premium housing and slum rehabilitation are the two main categories where the majority of developers such as Orbit, HDIL and Akruti City operate.

As of now, affordable housing is missing from the Mumbai market, since land prices in this region are among the highest in the country. Thus, it is difficult for this stimulus package to impact end customers in Mumbai.

Pune and Nashik real estate markets:

In other cities like Pune, Ahmedabad, Nasik and Surat, developers who have launched projects within Rs 15-25 lakh will benefit from the government’s package. Down South, property prices had started correcting earlier than in Mumbai.


Developers were facing a major headwind in sales. However, some sanity prevailed and with reduced profit margins, property is now being sold at affordable levels.

End user:

There is still some time before we see a major shift in investor sentiment and actual buying takes places in the market. In fact, some developers feel that the real estate sector requires much more than what this stimulus package provides. It is the end consumers who are now leading the demand in the sector. Though it may still be too early to gauge the actual impact of the stimulus package on real estate companies, it will definitely provide a breather to the sector.
To read more, please, visit - Stimulus package to realty cos may provide breather

Related Story:

Public sector banks cut home loan rates to prop up demand

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  1. Yes. Let me admit - you are providing a good compilation of news and articles.

    My opinion on India Real Estate:
    - Elsewhere in the world, the real estate is the indicator of Economic Prosperity. Whereas in India, Real Estate is being treated as engine of prosperity.

    - In India, citizens do not understand the meaning of 'Land Value'. Also we do not have standard agency who captures reliable data on Land Value Parameters and publish the ratings. So, the Builders play their own tricks on the location pricings. Generally, they are always OverHyped.

    - In India, we do not have any reliable data / stastics to gauge Demand / Supply situation of Real Estate market, as all developed and developing countries do have. Here, builders try to create their own imaginary database of demand and keep publishing some fancy figures in news papers to artificially jack up the demand. One example: A very famous builder in Pimple Saudagar told me that he has a demand of about 1500 flats. After a genuine effort and lot of push, the builder shared the supporting base data for this number of 1500 flats. This data was nothing but the names of people enquired about the project. A real buyer enquires with atleast 10 projects before he/she makes a 'buy' decision'. So this data is absolutely useless. Again, this data was a collection from November'07 to September'08. During this time, his actual booking was just 35 flats !!! So the demand data he has reported to PBAP (1500 buyers) is absolutely baseless figure. This is how PBAP tries to understand the Demand and publishes this demand in leading news paper.

    Just believe me, Real Estate sector in India is posed for a deep deep deep dive. Unfortunately, I will also be a part of that, because I booked a flat based on advise from analysts like you. My Bad Luck.

  2. Hello Atul! Thanks for the comment.
    I completely agree with you. Great analysis.

    # ref: " Unfortunately, I will also be a part of that, because I booked a flat based on advise from analysts like you."

    Dear Atul, I am real estate salesman!