8/5/2015

WhyrealestatefirmsmaybeforcedtocuthousingpricesYahooNewsIndia

Whyrealestatefirmsmaybeforcedtocuthousingprices
ThefundingsourceofrealestatecompaniesinIndiaisdryingoutandtheynowhavefewoptionsleft.
ByVivekKaul|YahooIndiaNewsroom19hoursago

ItisverydifficulttogetholdofnumberswhenitconcernstherealestatesectorinIndia.Thenumbersusuallyputoutare
byorganisationsandinstitutionsclosetotherealestatecompanies.
Theonegenuinesetofnumbersthatareputouteverymonthisrelatedtothetotalamountoflendingcarriedoutby
scheduledcommercialbankstotherealestatesectorinIndia.ThesenumbersareputoutbytheReserveBankofIndiaasa
partofthesectoraldeploymentofcreditdata,whichisreleasedonceeverymonth.
ThelatestsetofnumberswerereleasedbytheRBIonJuly31,2015,andmakeforveryinterestingreading,especiallyifyou
havehadalong(andperhapslost)dreamofbuyingahometolivein.
WhydoIsaythat?Allowmetoexplain.
AsonJune26,2015,thetotalamountoflendingcarriedoutbybankstothecommercialrealestatesectorstoodatRs
1,66,900crore.AsonMarch20,2015,threemonthsearlier,thenumberhadstoodatRs1,68,000crore.Hence,thetotal
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8/5/2015

WhyrealestatefirmsmaybeforcedtocuthousingpricesYahooNewsIndia

amountoflendingbybankstorealestatecompanieshasactuallycomedownbyaround0.7%.
Whatcansafelybesaidisthatinthecurrentfinancialyear(whichstartedonApril1,2015)onanaggregatebasis,thebanks
haventlentasinglerupeetorealestatecompanies.
Whatdidthescenelooklikelastyear?AsonMarch21,2014,thetotalamountoflendingbybankstorealestatecompanies
hadstoodatRs1,54,400crore.ByJune27,2014,thetotallendinghadgoneupby1.7%toRs1,57,000crore.Thisyearthe
totallendinghasfallenby0.7%duringasimilarperiod.
Howdothenumberslookoveralongerhorizonofoneyear?Thelendingtocommercialrealestatebybankshasslowed
downconsiderably.Asmentionedearlier,asonJune26,2015,thetotalamountoflendingtocommercialrealestateby
banksstoodatRs1,66,900crore.Overaperiodofoneyear,ithasgrownbyjust6.3%.
Theoveralllendingbybanksgrewby7.3%duringthesameperiod.
Thisisthethirdmonthinarowwhenthelendingtorealestatebybankshasgrownatamuchslowerpacethantheoverall
lending.Infact,weneedtolookatnumbersinJune2014torealisehowmuchthesituationhaschangedoverthelastone
year.
AsonJune27,2014,thetotallendingbybankstorealestatecompanieshadstoodatRs1,57,000crore.Ithadgrownby
17.2%overaoneyearperiod.Theoveralllendingbybankshadgrown12.8%.Hence,thelendingtorealestatecompanies
bybankshadgrownatamuchfasterratethanoveralllending.
Further,lendingtorealestatecompaniesbybankshadgrownby17.2%lastyear.Thisyearithasgrownbyonly6.3%.Also,
asmentionedearlier,sincethebeginningofthisfinancialyear,thelendingtorealestatecompaniesbybankshasactually
fallen.
Andallthisshouldbegoodnewsforbuyers.
Why?Forthesimplereasonthatthefundingsourceofrealestatecompaniesisdryingout.Realestatecompanieshaveto
repaytheinterestontheloanstheyhadtakenonpreviously.Theyalsoneedtopayinterestonit.
Overandabovethis,thereareprojectsthatarestillbeingbuiltandneedtobedeliveredbyacertaindate.Moneywillbe
neededforallthesethings.
Allthesereasonswillensurethatthecompanieswillhavetogetaroundtosellingtheunsoldapartmentsthattheyhave
builtandhavebeenunabletosell.Thenumberofunsoldhomesincitiesacrossthecountryishuge.
AsperanestimatemadebytherealestateconsultantKnightFrankthenumberofunsoldhomesinNationalCapital
Regionstandsataround1.89lakh.InMumbaiMetropolitanRegionitstandsat1.94lakh.InAhmedabadthenumberisat
42,000.InBangalorethenumberisat1.05lakh.Andsimilaristhesituationacrossthecountry.
Theonlywaytheseunsoldhomescanbesoldisbycuttingprices.Whiletherealestatecompanieshaveresistedthissofar,
withthefundingfrombanksalmostcomingtoastandstill,theyreallyhavenomoreoptionsleftinthedaystocome.
Finally,acchedinshouldbeontheirwayforthoselookingtobuyhomestolivein.
(VivekKaulisthewriteroftheEasyMoneytrilogy.Hetweets@kaul_vivek)

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