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5000 job cuts in Pune real estate sector, 450 projects halted

Kaustubh Kulkarni  |  Mumbai/ Pune 

Severe cash crunch and falling sales have brought more than 450 real estate projects in Pune to a standstill. This has led to around 5,000 construction workers and many others losing jobs. By December 2009, only 16,000 new apartments would be unsold in Pune while the demand is more than 50,000.

These numbers were revealed by a detailed survey undertaken by Promoters and Builders Association of Pune (PBAP), a body that represents a large number of real estate developers in Pune and surrounding regions. "Construction of cheaper flats is impossible for builders at a stage when there is severe credit crunch and the buying power of Pune residents has got stagnated due to higher home loan interest rates. This has formulated into a 'deadlock' which seems difficult to get resolved without active steps by the government of Maharashtra and Pune Municipal Corporation," PBAP president and Kumar Builders chairman Lalitkumar Jain told Business Standard.

A large number of real estate analysts have been projecting Pune as country's top destination for real estate investment as the city has seen extensive growth in sectors of information technology, automobile, manufacturing, education and services. All this resulted into a sudden price hike across all locations in Pune and real estate properties saw an appreciation of more than 200 per cent within three years. However, the PBAP over the last four months has experienced a sudden fall in sales mainly due to higer interest rates.

"We have come to a situation where we have asked all our members to sell flats at the lowest possible rates because banks are not keen on financing our new projects and unless our present flats are sold, we cannot start new projects," Jain stated.

Rohit Gera, another prominent developer from Pune said, the steps taken by the Reserve Bank of India (RBI) have helped bring down interest rates but the state government and local municipal corporation are adamant over taking any new measures to facilitate real estate growth.

Gera stated, around 450 real estate projects in Pune and surrounding localities were at a standstill since developers do not have cash in hand. "Since projects are held up, more than 5,000 workers have lost jobs and a number of engineers, architects and allied workforce too have received pink slips. And still, the government has continued the readreckoner rates while the stamp duty for land development has been increased from one per cent to five per cent," he added.

The PBAP also blamed PMC for severe increase in various premium and development charges, which the builders have no option but to pass on to the end buyer. "Our survey show that by December 2009, there would be only 16,000 ready-to-sell flats available in Pune while the demand is of more than 50,000 units. If the demand-supply gap continues, there are no chances of prices falling," Jain added.

First Published: Thu, January 15 2009. 00:00 IST