We all know that the real estate is not performing well but what are the reasons for this collapse?
As per my opinion the reason behind fall of real estate is its high price, that means the cost of flats are marginally higher than the budget of a middle class family.
As we know that the population of middle class family is very high in India and thus the majority of people cannot afford his own house.
The real estate can again be on track or even perform better if they reduce its prices, by doing this they can reach or attract the middle class family and thus their sales will grow.
As per my opinion the reason behind fall of real estate is its high price, that means the cost of flats are marginally higher than the budget of a middle class family.
As we know that the population of middle class family is very high in India and thus the majority of people cannot afford his own house.
The real estate can again be on track or even perform better if they reduce its prices, by doing this they can reach or attract the middle class family and thus their sales will grow.
Over and above the high prices, real estate companies have really worked hard to break whatever little trust the prospective buyers had in them, by not delivering homes on time.
Further, investors are no longer the driving force in the market, given the sluggish returns in the sector. For a real estate investment to be a viable proposition, after taking in the costs and the risk involved, it should be generating a return of at least 10 per cent per year. And this hasn't happened for a while.
The fear of job losses in the IT industry has also had an impact. The state of the IT industry has a major impact on real estate sales in cities like Pune, Hyderabad and Bengaluru.
In this scenario, the real estate builders have been offering discounts in order to get prospective buyers interested. While several developers offered upfront per square feet discounts, a few large developers bundled financing schemes and reduced interest schemes to offer 'all inclusive house prices'.
Home buyers, in many cases, were also offered indirect benefits such as reduced floor charges or premium location charges. Taking into account these aspects, the effective price correction was 5-10%."
Home buyers, in many cases, were also offered indirect benefits such as reduced floor charges or premium location charges. Taking into account these aspects, the effective price correction was 5-10%."
But even this 5-10 per cent correction isn't enough to pull buyers in. This basically means that home prices continue to remain expensive. As I have said earlier, home sales will revive as and when home prices become affordable, which is currently not the case.
For home prices to become affordable builders need to cut prices from current levels. Given that a majority of them are in no mood to do so, it basically means that home sales will remain sluggish in the years to come.
For home prices to become affordable builders need to cut prices from current levels. Given that a majority of them are in no mood to do so, it basically means that home sales will remain sluggish in the years to come.
Crisil Research expects that "in the next 12-18 months, prices are likely to remain stable at current levels on account of weak demand and moderation in new supply additions." This basically means that instead of a price correction, the real estate sector in India is seeing a time correction.
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