As the economy continues to weaken, the real estate market too has started showing signs of weakness, in line with other asset classes. Residential real estate prices across the country have started to soften, falling between 1 and 5 per cent across 22 cities out of the 26 that is tracked by the NHB Residex. Anshuman Magazine, chairman and managing director, South Asia, CB Richard Ellis, a global real estate consulting firm, told Sandeep Singh that the markets would continue to remain weak for a while and developers would have to put up with some pain too. Investors, however, will need to take informed decisions and keep their expectations realistic. Excerpts:
The NHB Residex showed a fall in residential real estate prices across the country in the last quarter. How do you see the trend going forward?
While there is pain in 2013, 2014 may pose a bigger challenge for the real estate market. It is very difficult to forecast anything in India as the real estate market does not follow a logic. It will happen when the market matures, and then we will see longer periods of lull. Currently, the pace of sales has gone down and they are going to remain slow with the slowdown in the economy. The only positive is that while sales are down, they are still happening. The problems with the current phase are: high uncertainty (both economic and political), liquidity problem, high mortgage rates and sentiments are subdued.
In what way is rupee depreciation impacting the real estate market?
There was an expectation that with depreciation of the rupee, NRIs will rush in, but on the contrary it has become worse and people sitting outside are thinking that with rupee depreciation the property they are going to buy is 20 per cent cheaper, but since there is no stability in the rupee, it can go down to any levels and they will lose out. Even the private equity (PE) money has dried. A new investor would not come in till the rupee stabilises. PE investors who invested 3-4 years ago are sitting on either flat or negative positions. They are looking to cut down their losses and exit, and in several cases where they got options, they have made an exit.
While there is a slowdown in the market, how is it impacting developers? Will some developers have to close down in times like these?
Maybe some smaller developers