It has been a difficult market to be in as a developer. Rising interest rates have impacted the customer interest in new properties moderating the flow of new funds and in addition to that high inflation and rising commodity prices have increased substantially the delivery cost for existing projects.
Replicating global trends, the Indian economy is looking towards an impending slowdown in growth due to decline in consumption expenditure, repeated hikes in interest rates and consistently high inflation.
The Confederation of Real Estate Developers’ Associations of India (CREDAI), Gujarat organised a seven-day technical tour for its members in mid-January. The 60-member delegation, that included developers from Ahmedabad, Mehsana, Rajkot, Surat, Palanpur, Navsari, Unjha, Bharuch and other centres, visited Israel, Jordan and Oman.
In view of the adverse publicity and shaken customer confidence arising out of significant delays in delivery of projects across the states, there is a strong acceptance of this matter by top management of the developers and investors alike.
Through the course of 2010, the realty sector evened out into a level playing field, with enough traction in the market to hold investor interest, with several on-going projects being delivered and others being launched.
The latest interest rate hike by the Reserve Bank of India (RBI) is bound to push up the price of housing loans as well as the residential apartments.
In a further blow to the dampened Diwali spirit of the realty sector, the RBI raised interest rates on today but said it was likely to hold off on further increases as it expects high inflation to ease beginning in December.
If the current economic conditions have proved nothing else, they certainly prove that investment in Indian residential real estate is impossible to write off, ignore or find an alternative to.
The level of FDI in the real estate sector is unlikely to show a quantum jump this year, courtesy a slow GDP growth rate, high debt levels of the real estate developers, labour shortage and economic crisis in the US and Europe.
Housing Development Finance Corp, India’s largest mortgage lender, plans to raise its fourth property fund from overseas investors, said two people close to the development.