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Real Estate Sector Still Deprived of Genuine Demand

Comments Off on Real Estate Sector Still Deprived of Genuine Demand   |   October 5, 2009    11:31am   |Contributed by Indian Realty News

So is the demand for homes getting real again? It seems to be a mixed bag so far. While developers are aggressively talking about a spurt in demand, industry experts and buyers attribute this ‘revival’ to the strong nexus between developers and intermediaries.

In fact, the demand in the residential segment for Q3 of this calendar year remained marginally higher than the previous quarter. However, leading developers said that the growth has been optimistic and some even claimed a 30% rise in demand in these three months.

Last month, India’s largest real estate developer DLF claimed to have sold 1,250 flats in two hours in the second phase of its Capital Greens project in Delhi. Rival Unitech too said that they had a sale of 3,500 apartments across cities between July and September. Similarly, BPTP sold nearly 2,100 apartments in the same quarter.

For Delhi-based realty firm Omaxe, Q3 got a sale of Rs 300 cr, up 50% from the previous quarter. And according to Niranjan Hiranandani, MD of Mumbai-based Hiranandani Developers, there has been an overall industry sale of 10,000 units in the Mumbai region in these three months.

These figures, no doubt, look impressive. But there is a catch. Industry experts and buyers say that this business is mainly the result of a strong developer-intermediary network. “To some extent it is artificial hype but it is not completely a false story. Around 35-40% of such stock goes to end users and 50-60% goes to brokers or investors who want to sell it off later,” says Pankaj Jain, executive director of Realistic Realtors, a North Indian real estate consulting firm.

Jain is not the only one echoing this view. Other reputed brokers in the industry also have a similar take. Rajesh Arora, vice chairman of Arora and Associates Realty, puts it this way, “It is not practical to sell 2,000 or 3,000 apartments within a few hours. They would have sold it to middlemen or agencies. The demand in the sector has remained the same as in the last quarter and though the prices in Mumbai have increased, in Delhi they are at the same level.”

Businessman and prospective buyer, Anil Dhawan, says that such claims by developers do not hold any meaning. “Financiers take up most of the stock. End users would possibly make up only 10% of the buyers in these cases.” Dhawan says that although the time is conducive to buy right now, he would mainly look at a ready to move in property over an under construction one to avoid delivery hassles. Developers, however, are upbeat about the housing demand. DLF is basking in the glory of ‘good demand.’ “We have launched the second phase of Capital Greens project. We are selling one flat per pan card and buyers cannot sell the property within a year. So I am sure that end users are the buyers right now,” says Rajeev Talwar, group executive director, DLF.

The demand is ‘robust,’ says CMD of Omaxe, Rohtas Goel. “There has been a 30% increase in this quarter. We had a sale of Rs 300 cr in these months as against Rs 200 cr in the last quarter.” Many also are of the view that the fear of increased prices later is propelling more number of buyers to come forward right now. That is leading to increased enquiries as well as conversions. “People think that is the best time to buy as prices may go up later. The price band of Rs 15-Rs 40 lakh is doing quite well. We will be launching more projects in the affordable segment. Our target is to launch 30 million square feet in residential space by the end of this Financial Year,” reveals a Unitech spokesperson.

Home loan offtake too bears out increased demand statistics. The management of HDFC is upbeat about 20-25% growth in the home loan disbursement. Also, according to a senior official from Indian Bank, the demand of home loan remained the same as it was in the previous quarter. “The demand for loans between Rs 15-20 lakh is more than the rest,” said the official.

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