Following the meltdown in US Housing markets, Indian real estate companies have shed about 30 % of their market capitalization before 6-8 months.
The inflation has recently touched 7.41 which is 40-month high. The same was 3.08 percent in Oct 2007. Such a steep rise in inflation forced RBI to hike the CRR or Cash Reserve Ratio to 8.00 percent.
Because of this, banks will give home loan at more interest and so the purchaser will like the deal done to be at a lower price so that the loss on interest can be compensated.
But builders will not be in a position to sell any premises at lower price because of increase in all the raw materials and transportation costs. Cement, one of the main raw material which was 170 / bag before a year is now 250 / bag. In the same way Steel, TMT are almost doubled in 6 months. And now-a-days purchaser wants every amenities and that too of good quality. So builders will not be in a position to compromise with the quality. Labour is also not cheap.
Liquidity crunch and soaring costs will be the main factors to decide which way the Real Estate market will go.
1 comment:
The turmoil in the global financial markets has cast its shadow on India’s largest real estate deal. India’s real estate developers, especially the mid-sized ones, have been facing a liquidity crunch since last year. Developers can no longer tap the external commercial borrowing route, while domestic borrowing costs have gone up on account of tight-fisted monetary policy, which is likely to harden further in days to come. In addition, the stock market has taken a beating with real estate stocks falling off their recent highs. Other sources of funding for instance, the London Stock Exchange’s Alternate Investment Market or listing real estate investment trusts abroad are also not feasible in current market conditions.
The tender that BPTP won, beating bigger players like DLF and Omaxe, has an allowed the company to seek an extension to pay the first tranche.Failure to make the payment within the extended deadline would result in the award being scrapped and a fresh tender being announced.What impact will it have on the Indian economy in general and Indian real estate sector in particular???For more view- realtydigest.blogspot.com
Post a Comment