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'Realty Sector Facing Worst Phase Since Lehman Crisis'

Experts feel that recovery may take 2-3 years and will wipe out at least 60 per cent of developers in the country

Photo Credit : Reuters

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Hit by the three "Tsunamis", demonetisation, RERA and GST, Indian realty sector is facing worst slowdown since the Lehman crisis and the recovery is visible only in next two years,  realty experts feel.

"This is the most challenging years in my over two decades of career. We have seen the recession, we have seen Lehman Crisis but this is the worst crisis since then. I feel the sector will take 2-3 years to emerge from the tunnel and I feel 60 per cent of players are not going to emerge out. The market will be hugely consolidated," said Anuj Puri, Chairman Anarock Property Consultants.

He was speaking at the Realty Plus Conclave and Awards, organised by the Realty Plus Magazine.

"In the last four quarters, sales are more than the launches.  Last year we launched only 20,000 units compared to the 70,000 units which we used to launch," Puri added.

"Going forward supply is going to be a huge concern. Holding cost has increased dramatically. The government is talking about the affordable housing, however, it is not the forte of private developers as intensives are low, margins are thin and is not worth taking the trouble for the huge compliance.," said Pradeep Jain, chairman of Parshvanath Group.

However, players agreed that this consolidation and overhaul of the sector was a necessity for the long-term gain of the sector.
"This time recovery will be on sound fundamentals and not transient sentiments," added Anuj Puri.

His views were backed by other developers.

"This phase is bad but once the phase is over only serious players are going to stay in the business. This will wipe out malicious developers and will restore honour and trust in the sector," Pranav Ansal, Vice chairman, Ansal Properties and Infrastructure said.
However, He added that there is need to properly educate developers and mainly brokers about the compliances.

According to Rohtash Goel, Chairman, Omaxe Group, "they agreed that there are some anomalies and compliance issues which the government need to work out. Today compliance and legal department are larger than the sales and marketing department of the developers. We hope that the issues will be settled down in next 3-6 months".

Talking about the affordable housing, developers added that even when there is a demand for affordable housing, high cost of land and thin margins are preventing large players to foray in the segment as the business model is not viable.

"The affordable housing model is not a viable business model for the developers as margins are dismal and there is no incentive. That is what is preventing private players in this segment. Also, there is demand for the middle-income group, in the urban areas. Unless the government give enough incentives and make land available at low cost, affordable housing will be far from becoming a reality," Jain added.


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