No buyers,investors pulling out, projects failing to take off
In realty, it’s a sad story
Ruchika M Khanna
Courtesy:Tribune News Service
The luxury-living bubble, it seems, has finally burst. Deluxe apartments and luxe villas offered by the country’s topnotch realtors in this part of the country are not just seeing a flight by investors, but have also failed to excite new buyers.
With recession hitting these realtors hard and most of these projects yet to take off, many a Punjabi’s dream of a plush house, seems to be crashing. A large number of investors are now pulling out of projects, even at the risk of losing their earnest money, in absence of desired returns and resale market.
Realtors and property consultants say around 10 per cent of investors in and around Chandigarh and Ludhiana have given up their stakes. It may not be a big number, but considering that an average of only 40- 50 per cent of each of these projects has so far been sold out, the percentage of those surrendering their share is substantial.
Says Guranchal Sethi, a leading property consultant in Chandigarh: “People here do not have the spending power to buy expensive apartments. Most of these projects were launched in 2006-07, when the realty sector was booming. Majority of investors in these projects were NRIs, who were looking at quick returns for their investments. But when the projects failed to take off and they failed to attract premium because of initial high pricing, many investors started backing out”.
Interestingly, another major reason for investors pulling out has been that a major component of the price has to be paid in white money. Since the economy in this region thrives on black money (which is unaccounted for), investors (other than NRI investors) got scared of putting their white money in projects when the downslide started in the realty sector in late 2008. “So, in order to stall the flight of investors, most builders are now offering discounts and allegedly accepting 50 per cent of the price in black money,” says Parminder Singh, a property dealer in Ludhiana.
A senior banker in State Bank of India, dealing with the real estate portfolio, said that a big reason for the projects not taking off was the lack of infrastructure around the location for these projects. “Most of these projects are located far away from the city, with little support in terms of road, power and water infrastructure. It hits the resale value of the property,” he said.
The trend has now started worrying even the banks that are now advising the realtors to cut down their prices so that the banks’ interests are not harmed. A senior official in Punjab National Bank, told The Tribune that some developers have started defaulting on their loan repayments. “We are now holding regular advisory meetings with two top notch developers and are pressurising them to slash prices so that they can sell more units,” he said.
No wonder, that the builders have either started reducing their prices, or are marketing their products as ‘expandable homes’ —- where basic structure is made at a much lesser price. They then charge separately for all accessorising and home fittings. A realtor, who has tied up with a Dubai-based firm to construct villas in Mohali, has recently started this concept and reduced the price of his villas by almost 20 per cent. Another builder, who is constructing apartments in Chandigarh, has slashed his prices by three per cent. He is also ready to reduce the price by Rs 200- Rs 300 per sq feet, if the buyer makes the payment within a short span of time. Others are doling out ‘juicy’ offers like giving free club memberships and luxury sedans to buyers.
However, with the economy back on the track, realtors feel that the worst may be over soon. “Things would soon change.
With the improved economic scenario, people have already started showing interest in these projects,” says Taran Inder Singh, director, Multi Tech Towers, Mohali
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