Is the Worst Over- Road Ahead For Realty

The last decade has seen major socio-economic developments in India, with the nation's last five years' growth recorded at a compound annual rate of 8.9 per cent. This impressive number meant improvement in the income level of urban Indians an

This in turn has amplified the demand for more and better housing, increase in office space, progress of contemporary trade formats, increasing demand for hotel reservations and the want for improved leisure activities. 

On September 2008, with the collapse of Lehman Brothers, the Indian real estate market also suffered a major shock. The effects snowballed through the liquidity centric real estate market leaving a track of defaults, delays, and losses. India was forced to temporarily halt the growth of its real estate sector. But our saving habit combined with the fact that we don’t really indulge in unbudgeted expenditure partially insulated us from the full effects of the downturn. The Indian economy continued its growth at 6.7 per cent in 2008-09 even though some sectors such as exports, real estate, IT, etc. suffered. 

Now, as the Government is also realising, if the country has to preserve its growth momentum, the real estate sector can’t be detained for long. Though the real estate demand in Bangalore has witnessed a slowdown of six-11 per cent, depending on the sub-city, when taken as a percentage of total demand, there has been absolutely no variance in the demand within sub-cities. In the recent months, property prices have corrected by 22-42 per cent in major cities, though 10-15 per cent downside is further expected. Despite this, India still has a housing deficiency of 23 million units. 

In Bangalore alone, 41 per cent of the demand is for residential properties in the sub-Rs40 lakh range and 26 percent for those in the Rs.40-75 lakh range, according to a three-month survey by a real estate portal. The survey also reports the oversupply of properties above Crore, and the supply is more than twice the demand for properties costing above Rs 2 Crore. In such a scenario, I believe property developers should try to synchronise their project specifications and actual demand to create a sustainable business. 

Since the last one year, Bangalore has been injecting the “affordable housing” trend into the real estate market. And with the massive housing shortage, there is an immense opportunity for real estate players to plan affordable and mass housing projects. Though there is massive demand shortage for high-end and luxury apartments, the demand-supply gap in the affordable housing sector is quite high. Banks have reduced their interest rates on quick loans and the prices for steel and cement have gone down considerably for developers to launch affordable housing projects. 

We, at Prestige, have also been concentrating on affordable real estate projects and have dedicated this year to completing and delivering ongoing projects rather than taking up new ones. For example, we completed the construction of the Forum Value Mall at Whitefield, Bangalore designed to be the sole ‘Outlet Mall’ in the city. Spanning over three lakh square feet, the mall features over 100 brands, both national and international, most of which are factory outlets offer unbelievable discounts throughout the year. This is the second offering from the Forum brand. Continuing with this trend, The Forum brand is all set to expand to other cities now. In the pipeline are Forum malls in Hyderabad, Cochin, Chennai – each being built with an investment of about Rs.300 Crores.  

Needless to say, we have always prioritised on customer satisfaction and hence, our current focus is on delivery and customer service. In keeping with this sentiment, we have successfully completed landmark projects such as, Prestige Kensington Garden and Prestige Wellington Park this year alone. The projects which were completed within schedule in July mark a key milestone in the Prestige odyssey as it marks the collective completion of over 1000 high quality apartments.  

My optimism that an economic resurgence is on its way is stronger than ever. According to the World Economic Outlook Report by the International Monetary Fund (IMF), though the world economy is likely to contract by 1.4 percent during 2009, India and China are expected to grow by 5.4 per cent and 7.5 per cent respectively. 

Nationally, in the April-June quarter of 2009, the Indian economy expanded by 6.1 per cent sequentially, a tad higher than the figure of 5.8 per cent in the preceding quarter. The Sensex and the Nifty — benchmark indices of the Indian economy — closed at their 16-month highs on September 16, raising hopes of strong quarterly statistics and liquidity flows. All the sectors, after a long time ended positive — Metal (4.20 per cent), Auto (2.23 per cent), Consumer Durables (2.17 per cent), Bankex (1.99 per cent), Realty (1.80 per cent), Information Technology (1.45 per cent) and TECk (1.34 per cent). The year 2009 is proving to be a healer in many ways. The other factor that is greatly changing the scene in the real estate market is the replacement of speculators by genuine buyers. 

Though the worst is over and the sun seems to be emerging from behind the dark storm clouds, it is imprudent to breathe the sigh of relief yet. It is time that we learn from our mistakes and ensure that we don’t repeat ourselves. Indian society has been blindly copying the West and has become increasingly consumerist over the last two decades. It depends on how we use our experience, knowledge and judgement to display the required maturity to keep our economy fit and afloat. 

The author is Irfan Razack the Chairman and Managing Director of the Prestige Group is popularly known as the architect of modern Bangalore. He founded the Prestige Group in 1985 which has today flourished into a household name in property development with interests in construction, retail and services. The 1000 crore Group boasts of an impressive report card featuring more than 184 projects covering 20 million sqft area and an additional 13 million sqft currently under development. 

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