According to a report prepared by Liases Foras, a real estate research firm, builders have no alternative, but to reduce the prices by a minimum of 10%.
In a report covered by HT, Rankaj Kapoor, CEO, Liases Foras was quoted saying, “A majority of the funding avenues have dried up and builders continue to be saddled with huge debts. Today, builders need to almost double their current sales to stay afloat. For this, they will need to reduce the prices”.
Currently, the Mumbai Metropolitan Region (MMR) sees a sale of almost 70,000 units annually, of which 18,000 units are sold in Mumbai region. The number of unsold units has reached a staggering 2.80 lakh houses in MMR, of which 1.30 lakh are in Mumbai.
Ashok Mohanani, vice-president, National Real Estate Development Council (West), said, “It has now become a matter of survival for builders. We may see price cuts in the coming days.”
The IL&FS scam has badly affected the funding to the real estate sector, as financial institutions are reluctant to extend loans. In addition, the introduction of the Real Estate Regulatory Authority (RERA) has tightened screws, as it disallowed taking money from home buyers without getting proper approvals. Even the private equity funds are not easy to obtain, and come at high interest rates.
According to Kapoor, there are currently three major stakeholders in the sector – government, financial institutions and builders.
“We are unlikely to see easing of norms from the government and financial institutions. The burden will force builders to reduce the prices,” said Kapoor.
Paras Gundecha, former president, Maharashtra Chambers of Housing Industry (MCHI) and CMD, Gundecha Group, said, “This is the worst phase in my career. Today, financial institutions are not even giving us sanctioned loans. How can we carry out ongoing projects without the funding? The government, which charges a huge premium, needs to intervene or else we will never be able to complete our ongoing projects. Forget profit margins, even completing projects is not easy.”
The Correspondent Bureau with inputs from agencies