Real-estate developers are not ready to lower the prices of their properties for end-users as they are cushioned with funds from banks and investors. The real-estate sector is flush with approximately Rs96,700 crore-Rs1,17,000 crore worth of funds, which it has raised through different means like Qualified Institutional Placements (QIPs), foreign currency convertible bonds and foreign direct investment.

“Prices won’t come down immediately because developers are utilising the funds that they have raised earlier. The correction phase will begin again, because inventories are piling up and the market has to show steady growth,” said Pankaj Kapoor, founder, Liases Foras.

According to Reserve Bank of India data, total lending by commercial banks to the real-estate sector was Rs96,701 crore from April 2009-August 2009. At present, developers are not fretting over end-user sales, as they are flush with funds; most of them have restructured their debts through the money they have raised from the markets.

“The December quarter will show 50% less sales than September because of the hike in prices. We will soon come back to the 2008 situation. I feel we will soon see sales in the Mumbai Metropolitan Region touching 12,000-10,000 units in a quarter, which is very less,” said Mr Kapoor.

End-users may have to wait for three-four months to secure properties at reasonable prices. To see a steady growth in this sector, builders will have to witness a minimum monthly sales growth of 3.5%-4.5%, considering the unsold inventories that they have in hand.

“One of the best quarters (for developers) was June 2009, when they enjoyed a healthy sales-to-inventory ratio. For the real-estate sector to exhibit a price correction, stock market valuations have to come down,” said Mr Kapoor.
— Pallabika Ganguly