In the present global scenario
where the national economies are interdependent, Indian real estate market is
directly impacted by the prevailing global fiscal dynamics. As a result of the
prevailing global downturn, the consumption & absorption of residential as
well as commercial real estate properties in India has marginally reduced.
Earlier when there was rapid absorption of residential as well as commercial real
estate properties, today the deals close at very slow speed. There have
been fewer real estate transactions and even though people have financial
capabilities, they have gone into a rather speculative mode with their real
estate investments.
Mumbai real estate market faces
yet another major challenge of very heavy real estate prices. Real estate
developers and financers in Mumbai are under stern pressure as the land prices
here are so high that the basic cost of building an apartment here is almost
double as compared to other metropolitan cities in India. The situation is
worsened by sudden hike in construction raw material costs. The prices of
cement and steel are at an all time high level. As a result, the per square
foot price of Mumbai properties is very high in Mumbai real estate market. In
the light of present prices for property in Mumbai, in spite of the stern contraction
in demand, neither the rentals nor the prices seem to be getting into self
corrective mode. The Mumbai real estate market has gone into
polarization mode where nobody is buying premium properties due to high prices
and rentals, the low cost housing projects face no sales in spite of heavy
discounts and add-ups in sales and rentals.
A whole set of negative
speculations seems to be prevailing across Indian markets. The sellers and real
estate developers are anticipating lack of demand; as a result they are not
coming forth with further projects and offers. At the same time, real estate
dwellers and buyers are increasing their savings in anticipation for lack of
jobs in future. In the absence of poor financial planning and no government
intervention it is risky to predict when the downturn shall end. Stern
government intervention is requisite for the particularly vital India real
estate sector which is going to a really bad phase. In spite of the marginal
impacts that India real estate sector generates on
Indian economy, the government and the Reserve Bank of India RBI seem to be
taking no greater steps to rescue the industry.
There is an immense demand of
price corrective measures for construction raw material like steel, and cement.
Steel, and cement prices have doubled in the last three years. It is due to the
off late hike in petroleum prices, the raw material transportation costs have
doubled as well. As petroleum prices impact the prices of every commodity
(tangible and intangible), in India and abroad, the government’s move of taking
subsidy off the petroleum prices has badly impacted Indian economy. A sudden
shoot in food prices has directly resulted into high prices for labour services
as well.
