India weakening

The outlook for the property market in India has weakened over the last few months and analysts are reluctant to give an estimate of recovery times...

Confidence is low and a constant negative commentary has aggravated the problems of affordability and high mortgage rates in real estate, according to a new report from Motilal Oswal Financial Services Ltd.

The report states that buyers are shying away from new projects and those under construction if delivery times are more than a year away.

They feel that prices could drop further in the medium term and they are not sure if the developers would have the ability to stick to schedules. So pre-sales, an important source of funds for developers to meet construction costs, is under threat.

Also list prices are no longer relevant as developers with projects in the pipeline and those that have been announced are offering discounts of 30 to 50 per cent on listed prices. They do not lower prices officially because they do not believe this would attract more buyers but would only aggravate the situation by making people wait for a further cut.

A few leading developers, however, such as Orbit Corporation and Oberoi Construction have dropped list prices, according to the report.

Property consultants felt that the outlook for real estate companies has worsened in the last few months along with their financial condition and were hesitant to give estimates of the possible time for recovery. But it is possible that the residential businesses could stabilise by March 2009 with some deals happening then.

The property consultants expect demand to start improving first in Mumbai, Bangalore, Hyderabad, and then Delhi. However, any significant improvement in demand is not expected in the next few quarters.

'2009 is likely to be one of consolidation. Developers with staying power will utilise this consolidation phase to emerge stronger and position themselves in an advantageous manner to capitalise on the growth phase post-consolidation,' the report says.

Source: www.propertywire.com