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6 reasons which has made indian realty market crash in 2016

slowdown in indian realty market

Basically Boom & Doom are part of every business. Every thing which comes up goes down. Real estate market was doing tremendously good between 2008 to 2012. This four years was best time for residential market. Even though commercial market was stagnant at this period. Now steps by step i will explain how real estate market has entered in recession by 2016.

BLACK MONEY:-

Black money plays a important part in indian real estate market. As per records only 8% of Indian pay taxes . As taxes in India are very high. Most of the transaction are done in cash generating huge black money in the market.Hence real estate was always considered as the best places to dump the cash. Now Cirle rates every where has increased. Cirlcle rate is the minimum value at which transaction has to be done or stamp duty has to be paid. Now as circle rates increased Black money consumption became difficult. Only few people who has white money can purchase. Which are very less in number. Hence real estate industry  lost a major chunk of buyers.

BUSINESS CYCLE:-

Every business which sees a Full fledge boom has to see a slow down. As we know Indian real estate market especially ( Metros & 2 tier Cities) Saw a boom between 2008 to 2012. As per my experience As i am a real estate agent in Gurgaon. Prices were increasing 40 to 50 Percent every year, even 100  to 200 Percent in few properties. This brought lots of investors who pumped lots of money and got huge returns. Their was a time when every body from every background was engazed into real estate. Either investing their own money or Earning commission on referring their Known ones. As example of one of project in Gurgaon Which was sold for 2700/sqft on 2009 shooted to a  rate of 8200/sqft in 2012. Now market picked so much due to speculation that it became out of reach of the real end users. From 2011 onwards End users  started finding them incompetent to buy property in their own city. From 2012 onwards even investors began to feel that rates are very high. Their after Began to withdraw their investments. From 2012 end to 2013 onward now the situation started arising when investors asked for some price and buyers were not ready to pay. Hence investors thinking that its a temporary slow down and market will correct in few months. From 2012 to 2014 Market went like this. After 2014 panic hit among investors and investors started reducing the price. The falling of prices started from 2014. But it was too late .Sellers were far more than the buyers. 2015 onward market began to crash. Finally real estate market entered into recession.

OVERSUPPLY:-

2008 onwards Residential Rates was incresing 40-50% Per annum. Taking advantage of the situation every builder from small to large Sold as much flats a possible. Builders took 30% intial payment before construction. Now this 30% was used to purchase land for other project. This was a cycle. Hence as per my observation Many builder has sold upto10 Times more projects of their capacity. Pre-launch became a fashion of that time. Government also wanted to earn more and more revenue from licence fees. Hence each city was added with some extensions, satellites or new sectors converting agricultural land into Residential zones (R-ZONES).Flats were getting sold like anything. Since End users were of only 30% of total sale. This created a huge inventory in the market. Every city was pumped with thousands and thousands of flats.

Delays in handing over possession:-

As discussed Many builders has sold upto 10 times of their capacity. Most of the builders are not able to carry on construction work. They are neither able to sell their unsold Flats Nor getting installments from investors/buyers. Even they not able to sell their land banks. Most of the builders have become bank defaulters. Now they are not able to complete their projects. Cities like gurgaon and noida You will see lots of Projects without any labour or construction. As per old payment plan builder used to take 30% before start of construction from 30% to 95% on completion of structure and only 5% on possession. Now Builders have completed The structure and collected 95% payment and stopped the work. Average time from completion of structure to possession is 3 years. Hence People are paying both EMI and rent. Hence people have lost complete faith on new bookings or under construction projects. Everybody is eyeing on Ready to move in property.

Slow down in other sectors:-

Economy in India and Globe is not doing well. Exports & manufacturing Sector is in bad shape. Hence leading to over all slowdown and Credit Crunch in economy. Lesser jobs lessor disposable income. Lesser spending’s. Hence Lesser investments in real estate.

Sentiment:-

As real estate rates are falling. End users are waiting for prices to fall further. So that They can catch the bottom price.

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