Oversupply affects real estate
High price points and sticky borrowing costs have weakened buyer sentiment in realty.
Mumbai: High price points and sticky borrowing costs have weakened buyer sentiment in the commercial and housing markets but realtors hope that since pent-up demand has increased over the three year slowdown in demand the first quarter of 2014 could see an upturn.
However for now there are about 11.09 million homes lying vacant in 2012-13, according to the ministry of housing and urban poverty alleviation. In the commercial space vacant premises range between 12 –22 per cent in different cities, according to property analysts.
Anshuman Magazine, chairman and managing director, CBRE South Asia, says office space segment witnessed a demand decline during Q3 2013, as corporates focused on consolidating and downsizing their real estate portfolios, and/or relocating to peripheral markets.
“While this has contributed to rental stability in most markets in recent months, subdued demand and high vacancy levels led to a steep decline in office space supply during the last quarter, weighing on future investment plans,” Magazine said.
Even investments in the real estate sector have slowed down across segments, resulting in stagnant construction activity. An Assocham study reveals a six per cent drop in outstanding investments in the real estate sector at Rs 14.51 lakh crore in September 2013 from Rs 15.39 lakh crore in September 2012. It says further that there is no respite expected till the first half of 2014.
However, Lalit Kumar Jain, president, Confederation of Real Estate Developers’ Associations of India (Credai) sees a turnaround in the first quarter of 2014 as there was a jump of 20 per cent seen in sales in the first half of December and interest rates are expected to come down. He says there is a skewed supply and skewed demand situation.