Investors give realtors the chill

Cash-strapped investors have now come out in the open, selling their flats along with property developers at real estate exhibitions and that too offering higher discounts.

Investors, at a recent property exhibition concluded by magicbricks.com, were seen selling flats at 30 per cent discount to the market rate compared with the builders’ offer of 15-20 per cent, according to reports. “Investors are more desperate to sell their properties than developers as they need funds urgently,”’ said Suketu Mody, president and chief operating officer of Coldwell Banker Goodwill Consultants, a US-based consultancy firm. Riding on low interest rates and a boom in the stock markets, investors had lapped up properties in key property markets such as Mumbai and the National Capital Region (NCR) in a big way, which led to a sharp spurt in realty prices in these cities. Prices of apartments in many parts of Mumbai had risen 250-300 per cent over the last three years.

But now cash-strapped investors are selling properties at higher discounts to improve cash flows after a stock market slump. The Bombay Stock Exchange Sensex has declined nearly 60 per cent from January this year. Investors normally comprise about 30 per cent of the property markets.

“There were significant number of investors from the gulf market. Most of them are looking at selling out their properties,” said an equity analyst from Mumbai-based brokerage who declined to be named. According to property brokers, investors have exited many areas such as Greater Noida, Kundli and even some parts of Gurgaon in NCR, which used to have an investor base of 30 per cent. This has led to over 20 per cent correction in the property prices in places such as Greater Noida and Gurgaon.

“It is an admission of the fact that prices are not likely to go up. Investors want to get in and get out of property markets at higher prices. When they see that is not happening, they are selling out, said Pranay Vakil, chairman of Knight Frank India, an international property consultancy. Raminder Grover, chief executive of HomeBay Residential adds that though investors can sell flats at cheaper rates, developers can’t do it as they have sold flats at higher prices earlier.

However, selling properties is not going to be easy as buyers are deferring their plans in the anticipation of fall in prices. Property transactions already have halved from the beginning of the year, due to rise in home loan rates and increase in monthly loan pay-outs. “Today there are no buyers. Investors need to wait and watch unless they want to go in for distress sales,” said Mody.