Mumbai: Tough times ahead for real estate developers

The real estate industry which was struggling to overcome the liquidity crunch will face even tougher times in coming days with a vast difference in the demand and supply ratioMoreover with the government focusing on mass affordable housing projects developers are concerned about existing stock and the fate of underconstruction projects stalled for years which experts say may lead to a major real estate slide downSevere liquidity crisesSpeaking to midday Pankaj Kapoor managing director Liases Foras a real estate data analytics company who will soon release his report on sustainability of debt for the real estate market said The lending rate for developers from nationalised banks is around 12 per cent Nonbanking financial companies NBFC offer R4 lakh crore at interest rate varying from 12 to 16 per cent and the builders cannot sustain the lending and cannot repay lenders in present sales conditions Actually they should have 25 times more salesHe added With the recent expose of ILampFS and DHFL the lending crises has led to a vicious cycle and the real estate industry is stuck in severe liquidity crises Builders will ultimately have to either reduce the prices of their existing stock or look for broking and consulting houses to bail them outToday the market is the best for buyers as there are many sellers who want to sell their stock In such a scenario builders are open for bargaining and negotiations Also we must understand that the land cost in the past 10 year period has gone up by nine times making the price of both underconstruction and ready stocks unaffordable for common man explained KapoorKapoor added Sales in underconstruction properties have been declining in the past few years While underconstruction properties attract 12 per cent GST no GST is charged on ready ones Additionally delay in execution and delivery has kept buyers away from underconstruction properties Our data shows sales in ready properties haves gone up from 11 per cent to 27 per cent in the past five years And in MMR the ready stock versus underconstruction sales have gone up from 11 per cent in 2014 to 26 per cent in 2018 If the trend continues the real estate industry will witness a further slowdown in coming monthsAffordable houses requiredThe need of the hour is affordable houses and with the market abuzz about Poddar group announcing affordable homes of approximate 250 sq ft carpet in Kandivli it could turn around the market furtherThe very fact that CIDCO and MHADA housing lotteries get over a lakh applications for a few thousand affordable houses is evident that people are willing to buy provided they can afford the price tags Ajay Chaturvedi a real estate consultant and expert saidAccording to housing expert Ramesh Prabhu Out of 13000 underconstruction projects registered with MahaRERA over 5000 are already stalled and most due to liquidity crunch It will be the NBFCs and other lenders who will have to bear the brunt of this as the developers are either bankrupt or are facing civil and criminal litigations and few are behind barsA boost for infrastructureWith an aim of providing affordable homes the government in its interim budget has given tax exemptions to developers undertaking affordable segments projects extending them for one more year for those that get approved by March 31 2020Speaking on it Dr Niranjan Hiranandani cofounder and MD Hiranandani Group feels the proposals in the interim budget include a boost for infrastructure as a result of increased spending on airports railways waterways etcHe said These will positively impact real estate If things happen the way they are supposed to we should be achieving twin goals mdash housing for the home seeker as also back to business for the industry The minister mentioned that India is poised to become a 5 trillion economy in 5 years and aspires to become a 10 trillion economy in the next 8 years This will obviously augur well for real estateCatch up on all the latest Mumbai news crime news current affairs and also a complete guide on Mumbai from food to things to do and events across the city here Also download the new midday Android and iOS apps to get latest updates