Ostensibly, all seems hunky-dory and that’s exactly what the city builders keep saying. But scratch the surface, follow the trail to its origin, piece together seemingly not-so-related issues and the big picture begins to emerge, one that tells a different story.
To go back to where it all began, the US sub-prime home loan rates issue has already negatively impacted most exporters, especially the IT companies. Just as the realty boom, to a large extent, was powered by the IT sector, a slowdown there, it can be logically concluded, will also have a negative effect on the domestic real estate. In fact it already has.
To make matters worse, for IT sector where luxuries such as bench strength are a distant dream, the private banks are no longer lending at rates as low as 7.75 per cent but at around 12 per cent. In effect, while the salaries of IT companies have taken a down turn, the EMI liability for the borrower has gone up by nearly Rs 5000 per Rs 10 lakh loan.
For the banks these loan accounts, when the default period crosses 90 days, translates into non performing assets (NPA), which in turn will negatively impact the bank’s profitability, pushing the banks or even the borrowers to liquidate the property. This will give rise to a situation not unlike what hit the US real estate market about a year ago.
The Indian Express asked a cross-section of stakeholders as to what’s in store for the city’s real estate sector in the next six months. Excerpts:
Maj (retd) Mathew Oommen, property consultant, Ambience, a property management company
Recently, a buyer wanted property in Kalyani Nagar. The seller was quoting Rs nine crore for the bunglow. The buyer, himself a businessman, said, ‘In Pune, there are two prices - fancy prices and realistic prices. Rs nine crore is a fancy price”.
Currently, in the city, fancy prices are a far cry from the realistic price. Of course there will be a price correction. It should happen within six months. The big builders have holding power, the smaller ones that will face the brunt of the collapse.
Col (retd) AK Ahuja, property consultant and member of managing committee Estate Agents Association of Pune
It’s a little premature to predict right now if there will be a correction in the Pune market because February and March are slow months as it is and also the property scene has been hit by the exodus of workers. So the picture will be clear only in the next 15-20 days. But the rates are completely stagnant in the city.
Rohit Gera, executive director, Gera Developers
No, I don’t think a correction is in the offing. Fundamentally there is an existing demand for housing in the city and even at the current prices Pune offers great value for money. What kind of a reduction are we talking about? If it’s three to five per cent, then it’s inconsequential. Even a Rs 100-150 up and down doesn’t affect the market so much. It must be at least 20 to 30 per cent and I don’t see that kind of thing happening in Pune.
Sanjay Lunkad, director, Rohan Builders
Whatever goes up has to come down and there are pockets in Pune where the rates have been corrected. Even if one person drops his rates the others are tremendously affected by it. There was a correction last year in Bangalore so I guess here too there will be stabilisation, I wouldn’t want to call it correction.
Kunal Gangakhedkar, manager, IBM and a potential buyer
I think the correction is already happening. In areas like Kalyani Nagar I have been tracking the same ads for a long time which means there hasn’t been great response to the high rates. In Bangalore the prices did come down by 15 to 20 per cent and I expect at least the same rate correction here too.
Sugandh Vighne, architect, potential buyer
I have decided not to buy a house now because I know it is not within my reach. The price hike is as high as Mumbai but there are no matching specifications. Being an architect I can categorically say that it isn’t a fair deal here. So there is no doubt that the prices need to be corrected.
Asha Misra, potential NRI investor
Two years ago when we were looking for a place to invest in, in Pune we saw these lovely flats in Kalyani Nagar for about Rs 60 lakh and some nice houses for Rs 70-80 lakh, but didn’t go in for it. This year when we came back, we thought we should make the investment but were shocked to find that the same places are now for Rs 1.4 to 1.5 crore. It’s crazy. There is no question of us investing at these rates.
Deepak Shikarpur, president, Computer society of India
Four years ago the Maharashtra government had announced an IT policy that entailed the setting up of IT parks with special concessions given to them. But as soon as the property market started to boom, they withdrew all the concessions. These need to be given back for starters as the companies will start looking elsewhere. Already Infosys has a new facility coming up in Kolhapur and TCS and Satyam have bought land in Goa. I have had IT company CEOs asking me to suggest a location 50-60 kilometers away from Pune where land is more affordable. Builders will not admit to a price reduction but when you start talking to them across the table they’re all willing to negotiate. My view is that in the next six months prices will come down by 30 per cent.
Sonal Modi, general manager, Maharashtra HDFC
We expect the Property prices to correct as such high prices are not sustainable. The investors are completely out of the market. The developers have been able to artificially manage the high prices that prevail today but these prices have to correct at some point in time.
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