Developers await further interest rate cut

After witnessing a year of unprecedented fluctuations, real estate developers are pinning hopes on further fall in interest rates, before launching new projects in Kolkata and its periphery.

Yet, for those looking out for low cost housing projects in the city and its close fringes, there are hardly any options.

Factors like unavailability of land, even though raw material prices are down, coupled with developers' reluctance to reduce prices further, may restrict developers to launch many LIG projects.

The recent steps by the government and the Central bank to reduce home loan rates have triggered interest for budget housing projects.

Reserve Bank of India (RBI) had announced a slew of measures, including, a refinance facility of Rs 4,000 crore, available against the National Housing Bank's loans and advances to the housing finance companies (HFC) at eight per cent interest rate for loans up to Rs 20 lakh, and capped interest rates for home loans.

But the developers are look at mass housing projects in the near term unless the state government provides them land at concessional rate.

In other areas like, Hooghly, Baruipur, Bardhaman, Durgapur, Joka, Madhyamgram and Dunlop, which were expected to emerge as satellite areas, either political disturbances or poor connectivity to the city, housing projects are unviable due to poor demand, even though getting land might not be a major problem .

"Given the kind of land bank with property developers in the city, prices are unlikely to fall. Also, with the limited supply of land, the developers might not be in a position to launch projects at Rs 20 lakh at the moment," said Abhijit Das of Jones Lang LaSalle Meghraj

According to Pradeep Sureka, of the Sureka Group, which had launched a low cost housing project in Baruipur quite some time back, about 40 per cent of the units are still vacant. He admits that fall in interest rates have not been triggered demand to the desired levels.

In view of difficulty in the availability of land, city-based Shrachi Group is planning to launch housing project in Jamshedpur.

Neotia of Ambuja Realty also agreed that even though developers were willing to launch low cost housing projects, there was not much land available for executing them.

In view of the demand for low cost housing, developers are also looking at tweaking designs, so as to fit into the budget of the buyers, and also to get rid of the unsold stock.

"The year 2009 will be a difficult year. A lot of developers might have to redesign their project, so as to adjust the prices. Also, unless the home loan rates come down to 9-10 per cent across the board, the real estate market will not see any substantial change," said Todi.

Also, unless major home loan providers like HDFC and ICICI Bank, which account for almost 50 per cent of home loans, do not reduce home loan rates further, the real estate market may not pick up substantially.

"Unless private banks reduce their interest rates further, it is difficult to predict whether the real estate sector will see a major pick-up. While the public sector banks have reduced their rates, it is comparatively difficult to get home loans from them," said Das. Yet, after a phase of lull in the property market, developers are gearing up to launch projects, held up for a long time now. Jitendra Khaitan of Pioneer Properties said, at least ten residential projects are slated for launch in the city and its outskirts in the first half of the year.

Like other cities, Kolkata had not seen launch of any major real estate project in the last six months. Most developers feel that the coming month will be apt to launch new projects, as raw material prices have come down, and interest rates are further expected to fall.

Ambuja Realty has lined up launch of three-four new projects, mostly commercial and one high income group housing project in Kolkata by next April.

Kolkata-based Sureka Group, a member of the South City consortium, is also planning to launch "a big project in the first half of the year," according to Pradeep Sureka, of the Sureka Group. Another city-based real estate firm, P S Group is planning to launch a middle income group (MIG) project in Rajarhat in the next one or two months, depending on the approvals. Developers said, they did not expect any further price correction in the coming months, as there had already been 5-20 per cent reduction in prices, depending on the locality for residential projects.