Real estate developers jack up prices despite a pile-up of inventories

15 October 2009

Despite a much improved market scenario, real estate inventories are piling up with builders. Undeterred, they are launching new projects. In the second quarter of this financial year (Q2 FY10) inventories have gone up by 20%. Last quarter (Q1 FY10) the inventories in six cities (Mumbai, NCR Delhi, Bengaluru, Pune, Chennai and Hyderabad) were a total of 2,82,999 units.

“From October onwards you will again see a drop in price of properties by 15%-20% as the developers have lot of inventories logged up. On top of that, they are increasing prices, encouraged by a more buoyant market,” said Pankaj Kapoor, founder and chief executive officer, Liases Foras, a property research firm.

In Mumbai as many as 68,000 units are unsold. In NCR Delhi it is 70,000 units, Bengaluru has 48,000 unsold units, Pune has 44,000 unsold units, Chennai has unsold units of 21,000 and Hyderabad has 31,999 unsold units.

Thanks to a slight recovery in the real estate sector, most of the builders increased prices by 10%-20% which has subdued sales. “In Pune, around 200 new projects have been further launched between June 2009–September 2009. We are foreseeing the same kind of situation across the six cities,” said Mr Kapoor.

During Dushera to Diwali most of the developers launch new projects. The inventories are increasing sharply and to reduce the inventories, the developers have to cut down on the prices and make their properties more affordable for the masses.

In Mumbai, properties beyond Borivali, were selling at Rs 2,000 per sq ft. The left-over properties are now priced at Rs 2,800 per sq ft. In central Mumbai properties sold at Rs 13,475 per sq ft, but the left-over properties are now priced at Rs 24,950 per sq ft. “Until developers do not bring down prices, properties are not going to sell,” said Mr Kapoor.

- Pallabika Ganguly [email protected]

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