<div>The common thread through all the year-enders and forecast reports by realty analysts and brokers is that 2012 ended with mayhem in the property market; and that the headwinds of economic recession, high property prices and rising unemployment would continue through the current year too.<br /> </div><div>The Indian residential and home sales market saw a decline of 30 per cent in fresh launches in 2012, against a 7 per cent fall in 2011, shows a survey by property broking firm Knight Frank. Concurring with this, another broking house report said the residential market across eight major cities witnessed a drop of 16 per cent in total new units launched over 2011. The luxury realty market suffered a bigger blow with new launches declining by up to 24 per cent. <br /> </div><div>Explaining the situation, Cushman & Wakefield executive MD, South Asia, Sanjay Dutt, says, “High consumer inflation, high home loan interest rates and a slower growth of the economy had a strong impact on end users, making them more price-sensitive. Whereas, cash-strapped developers were not willing to take up projects that may fall short on interest from end users.”</div><table width="100" cellspacing="5" cellpadding="5" border="0" align="right"><tbody><tr><td><span style="color: rgb(255, 0, 0);"><strong>50% was the percentage fall in new projects in Bangalore</strong></span></td></tr></tbody></table><div><br />The commercial realty market did not fare much better. A report by CB Richard Ellis (CBRE) showed that the uptake of prime office space in India saw a 26 per cent decline to 26 million sq. ft in 2012, compared to 35 million sq. ft in 2011. CBRE South Asia’s CMD Anshuman Magazine says corporates had shelved expansion plans amid uncertainty.<br /> </div><div>The Knight Frank report also connects the slower launches to developers becoming smart over the years, after being saddled with excessive inventories. For instance, the gap between the launch and absorption numbers for 2012 fell to just 32,000 units for the residential market, compared to the yawning gap of 82,000 and 94,000 units in 2010 and 2011, respectively. <br /> </div><div>Figures for disbursal of credit to realtors also reflected the slowdown. Cautious developers reluctant to launch new projects and complete old ones ensured that bank credit exposure to realtors fell from the peak growth of 23.21 per cent in June 2011 to just 3.88 per cent in September 2012. <br /> </div><div>The cities that bucked the trend were Mumbai, Pune and Kolkata. Mumbai — paralysed all through 2011 due to unclear Development Control Rules — woke up with a 72 per cent growth in new launches, or 22,423 units, in 2012 compared to 13,000 in 2011. On the other hand, Delhi NCR battled an oversupply situation from 2011 with a 31 per cent fall in new units launched (see Bites of Realty).<br /> </div><div>To add to the economic headwinds, guarded consumer response to the marketing initiative of builders will also be a major bottleneck in reviving the realty market. A survey of potential homebuyers by Makaan.com across metros showed that “most homebuyers are unable to justify or afford the high prices”. Buyers were also sceptical of poor location and connectivity of the projects; and feared that the infrastructure development promised around these housing projects would never take place. Of those surveyed by Makaan.com, 54 per cent blamed high property prices as a deterrent to buying, while 20 per cent said poor location and connectivity were dampeners. <br /><br /><span style="color: rgb(34, 34, 34); font-family: arial, sans-serif; font-size: 13px; line-height: normal;">(This story was published in Businessworld Issue Dated 21-01-2013)</span><br /><br /> </div>
BW Reporters
Gurbir Singh is an award-winning senior journalist with over 30 years experience. He has worked for BW Businessworld since 2008, and is currently its Executive Editor. His experience ranges from covering 'Operation Bluestar' in 1984 to pioneering coverage of the business of Media & Entertainment and Real Estate for The Economic Times.