The Real Estate sector in Mumbai is going through a very uncharacteristic situation this festive season. While tight liquidity, high interest rates and negative market sentiments have propelled the sector towards sluggishness; the supply side constraints have stubbornly ensured that prices remain on the higher side. But with the start of festive season, the future looks bright as sales are picking up. Mayura Shanbaug reports…
Despite the state’s decision to give .33% extra Floor Space Index (FSI) bringing festive cheer to an otherwise gloomy scenario and the proposed Real Estate Bill waiting in the wings, captains of the sector have contradicting opinions on what the future holds …….
According to Anuj puri, Chairman & Country Head, Jones Lang LaSalle India, the festive season holds a few surprises in store, but the revenue flow will remain steady.
“Thanks to a highly diversified services bouquet, we do not anticipate any drop in revenue due to sectoral fluctuations,” he says. “There has been a step-up on demand and our residential services division has been addressing a steady flow of purchase inquiries. Retail leasing has picked up considerably, as well,” he adds.
However, he agrees that residential sales which usually rise by 25-30 % during the festive period, this year for various market and economy-related factors have combined to keep the festive period rise between 18-20 %.
For Atul Modak, Head-Kohinoor City Project, this festive season brings in a pleasant surprise to see that even their commercial properties got a very good response although commercial ventures are not directly related to the festive season.
“Many businessmen too like to initiate their business ventures and moves on Dassera or during Diwali. That could be the reason why even commercial properties drew a good response for us during Ganeshotsav and Dassera. We are optimistic that the same wave will continue on the commercial front too in Diwali,” he says.
“As the festive has already started we see a tremendous increase in the sales in residential segment. Most of the home buyers look forward to investing during auspicious occasions like Diwali. We at KUL always get a positive response from our customers,” says Kruti Jain, Director, Kumar Urban Development Ltd, whose affordable housing concepts, good discount offers and schemes ensure healthy sales.
In Bharat Dhuppar, Chief Marketing Officer, Omkar Realtors and Builder’s words, Diwali is the time when everybody generally makes the big decision of buying a home. “There are many factors that are responsible for the recent slow down in the sector like global economic slowdown, increased cost of capital, lesser business transition,” he says. “In spite of all the reasons, we are witnessing much better sales than last month, but milder than Diwali last year. We launched one project this season and we have got a very good response so far with 50% of our new project have been already booked,” he adds.
Shirsh Mulekar, Director, Eiffel Developers & Realtors ltd says that there are three avenues where people park their money in today’s times: These are precious metal (gold, silver, etc), stocks and real estate. “With the share market going down and gold prices rising steadily, and the existing volatility in the market, there is no confidence in the investor for assured growth. Thus, stability and growth in real estate is the only sound assurance for an investor,” he says.
“Some people speculate that the real estate market is going down, but at no place in Mumbai, have we actually seen realty prices drop down. Activity has just slowed down due to the global meltdown, but there has been no real impact of the recession,” he adds.
There are a few who points towards the misses too. According to Lakshman Ludhani, Managing Director, Evershine Group, this Diwali, the market has slowed, but the overall supply in the market is low as well, due to the lack of new projects. “That is why the rates are not coming down and are not likely to come down in the near future,” he says. “But I agree that the off take this Diwali is way lesser than last year,” he adds.
Strongly opposing the cheerful mood put up by his colleagues is Ashok Chhajer, CMD, Arihant Superstructures Ltd who says, “As compared to last year no increase in sales is noticed. On the contrary there is fall by 20% seen in the market.”
“Only actual users are taking decisions and buying properties… Due to the huge delay in government approvals and rising construction cost. They have a feeling that the cost in the market is not going to come down,” he says.
“Last Diwali Investor’s and speculators have made huge wind fall profits and today they need to realise there is scope for good or altleast moderate earnings.” he adds.
What says the Future?
“The real situation has to improve as I said people need houses to live and there is going to be supply side constraint due to various government policies and other difficulties,” says Ludhani.
According to Chhajer there are good projects coming up in the next 12 months which majorly caters to the capital expenditure in the band width of Rs 15 lakhs to Rs 40 lakhs.
The “Real estate sector will drive the economy in the years to follow as the demand exceeds supply to a large extent. The rising interest cost may be concern for a short term,” he says.
Echoing Chhajer’s sentiments Dhuppar says, “For the next 12 months, I see very positive signs with some stability coming globally, equities market doing well and cost of capital which has already picked, coming down.”
Gundecha says the festive season does bring in cheer to the market and real estate is not aloof from it. “The recently held MCHI Property 2011 evoked an enthusiastic response judging from the record number of footfalls recorded and hundreds of requests received for follow-up visits to various developers’ sites. It is difficult to predict exact numbers in terms of sales, but we are hoping for the best” he says. Mulekar sums up the festive mood. “With the start of festive season, the future of the real estate sector looks bright with assured chances of sales picking up,” he says.
The 0.33% State Bonus
The long pending demand of extra FSI for the city was met by the Chief Minister Prithviraj Chavan few days ago by announcing 0.33% extra FSI for development for a premium in the suburbs.
The much awaited clearance of the .33 FSI is definitely a step in the right direction says Gundecha. “The government, however, needs to take many more such decisions to make the dream of ‘Homes for All’ a reality. None the less, coming at the time it has, it is definitely a step for the consumer to celebrate,” says he.
According to MCHI estimates Brihanmumbai Municipal Corporation (BMC) will be further enriched by other Rs 1000 crore per year due to this decision.
Developers feel that the money should go only towards infrastructure development in the city of Mumbai thereby building a better city.
However Chhajer feels an additional 0.33 FSI (floor space index) to real estate developers in the Suburbs are for a premium. “The cost to the developer will come down to some extent but however it is unlikely to pass on the benefit to the customer because of rising input and finance cost,” he says.
The recently held MCHI Property 2011 evoked an enthusiastic response judging from the record number of footfalls recorded and hundreds of requests received for follow-up visits to various developers’ sites.
Paras Gundecha,
President MCHI
There has been a step-up on demand and our residential services division has been addressing a steady flow of purchase inquiries.
Anuj Puri, Chairman & Country Head,
Jones Lang LaSalle India
This festive season brings in a pleasant surprise to see that even commercial properties got a very good response although commercial ventures are not directly related to the festive season
Atul Modak, Head,
Kohinoor City Project
“With the start of festive season, the future of the real estate sector looks bright with assured chances of sales picking up
Shirsh Mulekar, Director,
Eiffel Developers & Realtors
We are seeing a tremendous increase in sales in the residential segment. Most of the home buyers look forward to investing during auspicious occasions like Diwali.
Kruti Jain, Director,
Kumar Urban Development
This Diwali, the market has slowed, but the overall supply in the market is low as well, due to the lack of new projects. That is why the rates are not coming down and are not likely to come down in the near future
Lakshman Ludhani, MD,
Evershine Group
“There are many factors that are responsible for the recent slow down …In spite of all the reasons, we are witnessing much better sales than last month, but milder than Diwali last year.
Bharat Dhuppar , CMO,
Omkar Realtors and Builders
Only actual users are taking decisions and buying properties... Due to the huge delay in government approvals and rising construction cost, they have a feeling that the cost in the market is not going to come down.
Ashok Chhajer, CMD,
Arihant Superstructures