Some recent developments in the realty sector

 An online news-letter on property matters & development trends

It is stated by many ‘insightful’ reports there is a large unsold inventory of residential apartments across metro cities; for example in Mumbai it is about at 2,10,000 units. It is also estimated it would take 36 months to sell off this stock based on the sale velocity witnessed in the last two years. In Bangalore (do we say Bengaluru?) it is about 105000 units. NCR is grappling with 1,67,000 units. Chennai is said to have some 40000 of such unsold stock. The stock here refers to un-sold ready to occupy, un-sold under construction and un-sold units in projects launched two years back.

With so much of unsold stock we find some developers dropping prices of apartments in the case of small and medium apartments. Luxury apartments and top end villas have not had much of price correction.

Obviously the potential buyers find the prices of mid-segment apartments quite unaffordable! Given that the land is the main cost component in the value matrix of most of the urban apartment projects, we need to take a hard look at it! In Chennai kind of markets, the value of land constitutes as much as 50-75% of the quoted rate of the apartment, especially the city properties.

Curiously despite the fall in demand for apartments, continuing slow-down in the economy and demand the land prices stubbornly continue to remain high! There are some strong reasons why this is so; it is

common knowledge that a substantial amount of money invested in major apartment projects is that of select politicians, their side kicks, extended families,crony capitalists, corrupt Govt. officials and others who had parked their ill-gotten wealth in real estate. In some cases the lands are acquired much below their market price using the political/muscle power or with advance insider information. Therefore this money by definition does not demand any immediate return. So the investors have staying power and hold on to their prices. Consequently prices of land/apartments continue to remain high!

But how is that the prices remain high even in the case of smaller properties in urban areas?; after all most of these are owned by honest and law-abiding citizens.

The reasons for this phenomenon in this case are different! We will examine this in the forthcoming issue!

Do write to us in case you have some interesting information or feedback!

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