Real estate goes through a bad patch

by GLENN COSTA
Posted on 2008-11-08
PANAJI- The rollicking times for middle segment of the real estate seem to be coming to an end with volumes drying up and sales dropping by 20 per cent, with a probability of another drop by 10 per cent in the near future.
The middle segment is in the price range from Rs 25, 000 to Rs 40,000 per square metre rates and translates into a 100-square metre apartment or a comfortable two bedroom flat in the price range from Rs 25 lakh to Rs 40 lakh.
The consensus is that this slump in the real estate is connected to a global meltdown.
However, as of now there has been no crisis in the premium segment of the real estate, says Alan Viegas, a property manager. The premium segment is in the price range of Rs 50,000 and above per square metre.
Agrees Mr Aatish Babani, who is in the real estate in South Goa: “People who are buying places in Goa are the affluent people, and are not affected by recession or slowdown.”
But sales have slowed down drastically in the middle segment, he adds.
However, insiders say that builders, especially those who are in staying power, are not lowering the prices but offering discounts at present in the hope that in the next few months -- when people come down from abroad – prospective buyers will come down and sales will pick up.
This discount itself, however, is a big shift from the business conducted one and a half years back when builders were dictating terms.
The premium segment, industry insiders say, will not be affected but drop in volumes are set to become drastic in the middle segment as the season is not expected to be very good given the general scenario.
And land prices would really take a plunge.
This is because from December 2006 to February 2008 the land market went through a ridiculous price rise that was almost fourfold. This land price rise had been driven by the unorgonised sector -- read part-time brokers who can be your friendly baker or family doctor.
These brokers do not work on a professional ‘2 per cent’ cut but on a certain rate above the owner’s price that can range from a few lakhs of rupees to even Rs 1 crore on big deals.
“Land prices will fall, and rightly so,” Mr Viegas observes, arguing, “This fourfold increase in prices in one an half years’ time is ridiculous and is supported by uninformed and gullible buyers from out of state.”
The housing segment has been affected by the sudden erosion of wealth, which could be attributed to the plunge of the stock market and the knee-jerk reaction of tightening up of credit.
Agitations against construction projects have also slowed down development activities. These agitations have affected the real estate across the board.
The local market has still not dropped rates as stakeholders in the market are adopting “wait and watch” approach.
Analysts observe that there are not many small-time operators as most have already disappeared as it is uneconomical for them to be in the market any longer.
Says Mr Babani, “Due to agitations the credibility of the market is under pressure. Builders are getting worried to launch projects and panchayats also are not accepting applications. And clients hesitate mainly due to the uncertainty.”