Tuesday, June 6, 2017

Real Estate - Market feed back

"Social order at the expense of liberty is hardly a bargain."
—Marquis de Sade (French, 1740-1814)
Word for the day
Notabilia (plural noun)
Matters, events, or items worthy of note.
Malice towards none
Is the undue focus of media & people on star kids Taimur and Aradhya a case of child abuse?
First random thought this morning
Household power back up is a reasonably large industry, mostly in MSME sector. The business of assembly, sales and repair & maintenance of power back up equipment (inverters and UPS) and batteries employs a large number of people, especially in perennially power deficit areas of UP and Bihar.
The 24X7 power supply would essentially mean closure of this entire chain of business. Youth could probably adjust in some other business by re-skilling, but there are many middle aged people in this trade who would nowhere to go!

Real Estate - Market feed back

In past couple of week, I have met many people engaged in the business of real estate - developers, financiers, brokers, construction material suppliers. I also spoke with some prospective buyers.
I find it pertinent to share my assessment of the current state of affairs in this vital sector of the economy. I may however clarify that this assessment may suffer from the inadequacy of the my sample and therefore need necessarily not apply on all India basis.
(a)   Most real estate developers were of the opinion that once RERA is notified in all the states, the new launches will dry up for 2-3yrs as the developers get used to the new norms.
Micro developers who can complete project without presales are best placed to benefit from RERA.
Very large developers with land bank may take upto 1-2yrs to develop the ecosystem envisaged under RERA to be able to launch new projects. Medium sized developers without any land bank may take much longer to get back in the business.
There is much concern about the status of incomplete projects. There is a fear that there could be considerable delay in completion of these projects as registration under RERA could take time.
There is an expectation that due to supply disruption, the real estate prices may not fall much from current levels. Moreover, many feel, that the prices may have already bottomed out and due to higher cost and compliance levels, the prices may move higher in next one year.
The private real estate construction activity in UP is standstill due to a variety of reason - shortage of sand, government pressure where approvals are suspicious, RERA, demonetization, high circle rates etc.
Small and midsized property dealers and brokers, who have been facing stiff competition from online property brokers and facilitators, fear for their existence.
(b)   Most developers felt that mass rental projects under affordable housing segment, would be a massive growth area in next couple of decades.
(c)    Prospective home buyers are ambivalent as yet. However, most agree that they need to buy a house and any indication of price hike will prompt them to expedite their decision.
(d)   Both midsized cement companies I met, suggested that prices of cement may not rise in near term. Both suggested that price coordination amongst producers is weakening. Cost pressure are easing, as coke and fuel prices seems to have peaked. GST is seen marginally beneficial due to input credit allowance.
(e)    Appliances, fittings and furnishing manufacturers, distributors, retailers and consumers are sanguine about the strong demand in near term. None of them appears sharing pessimism of real estate developers. Up-trading and viability (better power supply, women also working, etc) are the key words here.

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