Housing demand down by 50 p.c.
What goes up has to come down. On a high since 2005, Indian property market descended in 2008 with prices falling by 15-20 per cent. High interest rates regime and economic slowdown, coupled with the ripple effect of the U.S. sub-prime crisis, cooled off the overheated realty sector to some extent, forcing developers to adopt cost-cutting measures, such as deferment of projects, salary cuts and layoffs.
Developers, big or small, faced huge liquidity crunch as both end-users and investors shied away from the market. The sector’s woes got further accentuated from the kind of battering it received at the stock market, with its share price falling like ninepins.
The fall in sales volume was so sharp that turnover and profit of almost all the companies started to decline from the first quarter of 2008, which became more pronounced as the year progressed.
“In 2008, the Indian realty sector took an unprecedented body blow. There has already been an overall drop of demand to the tune of 45-50 per cent,” real estate consultant Jones Lang LaSalle Meghraj Chairman and Country Head Anuj Puri said. The prices of residential units fell by an average of 15-20 per cent across the country and a similar trend was witnessed in rentals for retail spaces.
Discounts
The slump in demand forced developers to offer discounts and freebies to boost sales. But that did not help the industry, and it sought government’s help to come out of trouble.
The Centre did not disappoint the industry and announced lower interest rates for home loans up to Rs. 20 lakh, which prompted the developers to focus on affordable housing.
It was all well till the end of the last year and realty majors including DLF, Unitech and Emaar MGF were all set to raise huge capital from domestic and overseas markets in 2008 to fund their massive expansion plans. But the mood changed within a few months when Emaar MGF had to withdraw its maiden public offer of over Rs. 7,000 crore in February because of bad market condition.
On seeing the fate of Emaar MGF’s IPO, many other realty firms decided not to try their luck in the capital market. The development was in complete contrast to 2007 when the sector emerged among the top fund-raisers with DLF leading the chart at over Rs. 9,000 crore.
PTI
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