Real estate market bore the brunt of slowdown in 2008
(NewDesignWorld Press Release Center) --
What goes up has to come down.On a high since 2005, Indian property market descended in 2008 with prices falling by 15-20 per cent.High interest rates regime and economic slowdown, coupled with the ripple effect of the US subprime crisis cooled off the overheated realty sector to some extent, forcing developers to adopt cost-cutting measures, such as deferment of projects, salary cuts and layoff of employees.
Developers, big or small, faced huge liquidity crunch as both end-users and investors shied away from the market. The sector's woes got further accentuated from the kind of battering it received at the stock market, with its share price falling like ninepins.The fall in sales volume was so sharp that turnover and profit of almost all the companies started to decline from the first quarter of 2008, which became more pronounced as the year progressed. "In 2008, the Indian realty sector took an unprecedented body blow.There has already been an overall drop of demand to the tune of 45-50 per cent," real estate consultant Jones Lang LaSalle Meghraj Chairman and Country Head Anuj Puri said. He pointed out that the prices of residential units fell by an average of 15-20 per cent across the country and said similar trend was witnessed in rentals for retail spaces.
Discounts
The slump in demand forced developers to offer discounts and freebies to boost sales. But that did not help the industry, and sought government's help to come out of trouble.The Centre did not disappoint the industry and announced lower interest rates for home loans up to Rs. 20 lakh, which prompted the developers to focus on affordable housing.It was all well till the end of the last year and realty majors like DLF, Unitech and Emaar MGF were all set to raise huge capital from domestic and overseas markets in 2008 to fund their massive expansion plans. But the mood changed within a few months when Emaar MGF had to withdraw its maiden public offer of over Rs 7,000 crore in February because of bad market condition.On seeing the fate of Emaar MGF's IPO, many other realty firms decided not to try their luck in the capital market.The development was in complete contrast to 2007 when the sector emerged among the top fund-raiser with DLF leading the chart at over Rs 9,000 crore.
The realty index on the Bombay Stock Exchange fell by over 82.49 per cent at 2,283.52 points on December 30 compared to 13,037.89 points on January 1 this year. Unitech seemed to be the biggest loser with its scrip currently trading over 92 per cent down since the beginning of the year.The shares of DLF, IndiaBulls, HDIL, Sobha Developers, Omaxe and Parsvnath also crashed between 73 per cent and 90 per cent on the BSE during the review period............
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