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Opening up to reason: With a series of financial fiascos some lessons are being learnt by builders and buyers alike.

Armed with the slashed down lending rates on housing loans and elimination of stamp duty on registration, the year 2009 began on a positive note for the real estate sector in the city. Though the economic meltdown continuing from the previous year has not shown signs of relenting, it has at least made the industry realise that speculation without circumspection would result in disaster. Some reason is dawning and some lessons are being learnt.

However, the New Year, soon after the celebrations are over, exploded over the Satyam scam, the unexpected bomb in waiting. Tens of thousands of IT professionals were condemned to an uncertain future, with many more losing their stocks for something less than peanuts. People suddenly became extremely cautious while weighing their options vis-À-vis housing loans or investments on assets lacking liquidity.

Perhaps, the real estate sector has never before faced such a situation when hope and despair played constant hide-and-seek with the realtors as well as prospective buyers.
Mismatch

“The sudden spurt in the real estate earlier had been more due to the rates which were jacked up unnecessarily. There was a mismatch between affordability and pricing, resulting in stagnation. It took two to three years for the phenomenon to subside,” says Ravinder Reddy from Janapriya Syndicate analysing the present situation. However, he tries to sound confident when he says “nobody can stop urbanisation, nobody can stop migration to urban areas, and nobody can stop small families branching off from joint families,” and in saying so, implies that the real estate will regain its pace.

He also has a valid point when he says that housing options in the range of Rs.15 lakh to Rs.20 lakh have not suffered losses, due to their attainability.

Many in the industry choose to agree with him. President of the Greater Hyderabad Builders Federation Prabhakar Rao says that a few developers offering affordable housing options were flooded with enquiries at a recent expo.

“There is vast requirement for housing in the city. We are expecting 30 to 40 per cent improvement within three to four months,” Mr. Rao says. Builders who have already incurred high costs on premium apartment complexes built at upmarket localities will be in for a financial shock if they do not make price corrections immediately. Focus is shifting a great deal from software professionals and non-resident Indians to the State and Central government employees and banking professionals who would prefer functionality at lesser cost to pricey localities. “Nine municipalities still have traditional markets. About 80 per cent housing is done there . These are the real markets catering to the preferences of the end-user,” says Shekhar Reddy from Builders Federation.
Off the rails

The uncertain future of the Metro Rail project seems to be the most recent straw on the camel’s back. The 71.16-kilometre corridor promised the sky for property owners en route a. Negotiations for property deals began once the agreement touted as the ‘world’s best’ was signed. Even second-hand apartments suddenly accrued unusual values in areas such as Hayatnagar, L.B.Nagar and Moosarambagh. However, developers are sceptical, perhaps in a state of denial, about the impact.

“It is too early to say. A few properties around the proposed stations might be hit,” says Mahender from Indu Projects.

Eight years, the proposed duration for Metro Rail project, is far too greater a lead-time to start real estate projects, a developer opines. However, builders may be construed to be prejudiced when they choose to ignore the tendencies of the speculators, who buy or publicise properties much in advance.