With buyer sentiment still negative, India's big property developers are faced with unsold inventory and rising costs
MUMBAI: There seems to be no clear sign of recovery in the real estate market. Even the otherwise busy season (January to March) could not prove to be any better than the previous quarters. This is evident from the offtake of inventory at project sites of various developers.
A recent property brokers' poll conducted by Edelweiss on the residential property market also throws up the same results. The only projects that are selling are the ones that are priced at least 25-30% discount to the ongoing market rates. In fact, some of the new projects (Lodha's project in Thane, Dombivili, HDIL's project in Andheri and Kurla) launched in Mumbai and around did see some good response as they were priced very attractively.
Buyer sentiment is expected to remain negative due to weak economic environment. Consequently, property volumes would remain muted and prices would decline further.
As per the survey, 76% brokers expect price trend to be negative over the next three months and 53% brokers expect price trend to be negative over the next one year.
Location-wise, Bangalore is the least pessimistic market with 32% brokers having negative outlook over the next one year. On the other hand, Chennai remains the most pessimistic with 73% brokers having negative outlook for the same period.
This would further have a subdued impact on the earnings estimates for the sector. Sales are expected to be down by more than half of what they were in the March '08 quarter. Both DLF and Unitech, the largest players of the sector, are faced with unsold inventory and increasing interest costs.
No utopian situation can lend a helping hand to the declining operating profit of these developers, and things do not seem to be getting better for another year for either of these developers.
By ET Intelligence Group