The Hindu : Andhra Pradesh / Hyderabad News : Real estate developers in a dilemma recession effect

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Thursday, Nov 27, 2008
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Andhra Pradesh

Andhra Pradesh - Hyderabad

Real estate developers in a dilemma recession effect

T. Lalith Singh

Scenario is grim and property prices on an average are going down, says builder

- PHOTO: P.V. SIVAKUMAR

Ripple impact: Global economic crisis did end up casting its shadow on the real estate sector in the city. Developers say they will be forced to scale down the prices.

HYDERABAD: What goes up must come down! The law of gravity seems to be proving its harsh reality for real estate in the city and suburbs after property prices went through the roof in last few years.

Economic crisis

The global economic crisis did end up casting its shadows on the real estate industry here and leaving the developers in a quandary. Scores of projects are in varying levels of construction while several more on the drawing boards with consumers asking just one question— are the prices coming down?

From builders of small projects to those coming up with mega ones agree on one point – decline in enquiries and a growing demand for reduction in prices.

Scenario

“The general scenario is really grim and property prices on an average are going down,” points out a builder. With no buyers for unsold apartments, developers with projects in progress are the ones badly hit, it is said.

A sense of job insecurity particularly among the IT and related services has come as a bane for the real estate industry.

“Most of the youngsters are worried and are not in a position to consider long home loan terms to acquire property,” concedes another developer.

Till recently, these luxury apartments were sold at Rs.3,000 to Rs.3,300 per sft range and with no option left, the developers say they will be forced to scale down the prices. While the talk on affordable housing has already gained momentum, the present scenario if it persists for couple of months, might make builders bring down the sft pricing to well around Rs.2,200 to Rs.2,500 or push still below.

While big projects with the luxury of absorbing shocks might not go in for price reduction immediately, it is the small and mid-level builders with money borrowed heavily from different sources or financial institutions who are heading for a crisis situation.

“The prices have already come down by Rs.200 to Rs.500 per sft in most areas and look poised to come down a bit further,” says the Greater Hyderabad Builders Federation president, C. Prabhakar Rao.

The overall drop is put between 10 to 20 per cent in most locations and even the prime areas have gone down by at least 10 per cent, he agrees. In the end, only the professional builders with certain resilience will remain in the field while many who came to cash in on the boom will vanish.

“Those who came in anticipation of very high profits will be phased out and given the losses they face, might never think of coming back again,” Mr. Rao adds.

As for the prospective buyers, they seem to prefer a ring side view and watch the developments with the hope that the prices will drop further and usher back the concept of affordable housing.

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