Investors in Delhi NCR having a tough time

March 19, 2008	(Be the first to rate this story!)  Loading ...
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While the bears are ruling the stock market, there is another asset class where the bulls are keeping away. Speculative investors in real estate market are retreating, at least in the Delhi-NCR region.

Some leading real estate developers based in the region say it is becoming increasingly difficult for them to sell flats at launch stage due to lack of interest from speculators. This reflects on the inherent demand structure in the real estate market.

Developers attribute this to stability in prices as against the past where prices were shooting up on a monthly basis.

They add that the difficulty in booking flats may delay projects and reduce their pricing power, “A year ago, if we were selling over 100 flats in a month at launch stage, we now sell only 30-40 per month. Speculators, who would earlier frenetically book flats at the pre-launch stage only, have now disappeared,” said a senior executive of a real estate firm.

Till mid-2007, speculators made quick money by booking multiple flats at the launch of a project and exiting within a few weeks or months. But now, Omaxe executive director Vipin Aggarwal says, “The property prices have stabilized with little scope for speculators to make such big gains in the short term, leading to their retreat.”

However, some developers say this does not necessarily mean a slowdown. Explains Unitech general manager (corporate planning & strategy) R Nagraju, “Apartments are not immediately sold these days. But there is no problem as long as developers are able to sell all flats in the lifetime of a project. Instead of speculators, it’s the actual users who are booking flats now.”

It’s not easy for a developer to differentiate a speculator from an investor or an end-user. But Mr. Nagraju, on the basis of the turnover in the newly booked flats, estimates that new home buyers may not have more than 10% speculators among them now, as against up to 70% in several projects earlier. DLF spokesperson said the company was deliberately trying to keep speculators away from its housing projects in order to keep market stable.

The slow off take of projects is surely a matter of concern to the developers, because most of them, mainly smaller ones, depend on the booking money to complete the project. “Slower off take squeezes the cash flow in the company, which constrains its ability to pay back raw material suppliers, and acquire land for new projects,” says Ansal Properties and Infrastructure president (marketing) Kunal Banerji.

In a recent report, Merrill Lynch says that while most real estate firms in India expected to grow 2-3 folds over the next 2-3 years, it remained circumspect about the possibility due to execution issues and partly due to a pullback in the volume as speculators have retreated.

News Published Under:   Real Estate India, Delhi, Real Estate Developers |

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