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Presented By:
Yogin Vora
IMPACT OF RECESSION ON REAL ESTATE IN INDIA
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Major Growth Driver:
Residential Segment:
Increase in Income level combined with trends
of higher urbanisation and nuclear families.
Backed by easier availability of housing loan
Commercial Segment:
India emerging as global back office for services
like IT& IT based business, multinationalcompanies , SEZs.
Retail & Entertainment Segment:
Given growing disposable income & emergence of
organised retail, entertainment destinations.
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MORE CATASTOPHICTHANTHE
AMERICAN BANKING MELTDOWN
American Banking Collapse is more miniscule 1000 times bigger than the mortgage bubble
RBI examined books of 10 realtors to verify
solvency and assess risk of possible defaultson loans and deposits
Companies Identified DLF,Indiabulls,Unitech,HDIL,Mahindra
Lifespace,Ansal Properties, PhoenixMills,Akruti Citi,Phoenix Mills,PeninsularLand
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Effects ofMeltdown on economy
Fall in stock markets
Increase in interest rates
Slowdown in IT industry
Unemployment
Inflation
Retail & tourism has also suffered
As a result real estate space witnessed pressure from
demand side and become very difficult to sell
projects.
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Impact on Real Estate sector
Increase in prices of inputs due to inflation effecting
all areas of economy like cement, steel, etc.
Increase in home loan interest rates resulting into
additional EMI burden on the borrowers.
Reduction in salaries and layoffs resulting into
reduced demand for Real estate
Demand-supply imbalance
Forced correction in prices
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Impact on Real Estate sector (contd.)
Reduction in Commercial Rentals
Projects stagnancy
Slow down in infrastructure projects
Difficulties to raise fund (Failure of EmaarIPO)
Loss of Jobs
Shortage of skill workers
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Price Reduction in Major cities
Metro cities % change in High
End Area
% of change in
Low end area
Mumbai 12% 20%
Delhi 5% 15%
Banglore 10% 17%
Kolkota 5% 12%Pune 18% 21%
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Price Reductions
Overall price cuts of 10-12%
In Banglore, DLF group reduced prices by 25%
In Thane, Lodha group cut prices by 30%
In Mumbai(LowerParel) Orbit group cut prices by 20%
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EFFECTON FINANCIALS JUNE09
Overall 76 % dip in profits & 57 % fall in sales in FirstQuarter of FY 09-10 over First Quarter of FY 08-09
DLF - 79 % decline in profits & 57 % slide in sales
Unitech 63 % decline in profits & 50 % slide in sales
Parsvanath, India bulls, HDIL,Akruti, Shobha,Purvankara have reported decline in profits upto 95 %.
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Measures
Reduction of interest rates.
RBI policy for restructuring loans.
Reduction in excise duty on construction material
like cement.
Encourage property development in TierII and
TierIII cities
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Measures (Contd)
Under the Interest Subvention Scheme Loan upto
Rs. 10 Lakh, & property value is not above Rs. 20Lakh will get 1% lower interest.
Corporate like Tatas introduced Nano Housing
for Rs. 3.9 Lakhs- Rs. 6.7 Lakh called as Shubh
Griha project.
SBI introduced 8 % housing loan scheme for oneyear followed by the otherPSU & Private Sector
Bank as well.
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Tips to Individual Investors:
Determine a budget
Deal with reputed builders
Opt for developed properties
Check out the rates of next best options
Go for fixed interest rate loans
Dont bite freebies bait
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Question to theAudience
Meltdown in Real Estate a Boon or a Bane ?
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THANK YOU
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