It's not viable to cut prices: Developers

On Monday, RBI Governor had asked for cut in home prices

A day after Reserve Bank of India Governor Raghuram Rajan’s plea for lowering of property prices to boost demand, real estate developers said it was not a viable option for them.

Confederation of Real Estate Developers’ Associations of India (CREDAI) president and ATS Infrastructure managing director Getamber Anand said, price of 90 per cent of the residential supply in the country has already corrected. “If prices fall further, it will lead to non-performing assets (NPAs) and non-delivery of projects,” Anand said.

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DLF chief executive Rajiv Talwar said, home prices have already come down by 35 to 40 per cent. “Public figures are only talking about prices in prime locations. Those residential prices are high because they are located in prized locations. All over, prices are between Rs 3,000 and Rs 5,000 a square feet. In good locations, prices are between Rs 5,000 and Rs 8,000 a square feet. It’s the bare minimum, given the cost of land and cost of construction,” Talwar said.

He, however, added that all parties, including developers, the RBI and commercial banks should continuously play their roles in boosting property demand: “Everybody is into a blame game. But I feel developers need to offer low prices. RBI should keep rates low and banks should offer lower rates for two years to encourage people to buy homes,” said Talwar. Real estate has seen an eight-year slump and everyone has to make efforts to lift the situation.”

According to Amit Bhagat, chief executive officer of ASK Property Investment Advisors, developers are in a dilemma.

“If they reduce prices in an already launched project, they have to face cancellations from those who booked earlier. That is why they are not cutting rates but negotiating and reducing rates on individual basis,” he said.

Bhagat said developers have already been cutting prices through schemes and offers.

At an event in Mumbai on Monday, Rajan said he was hopeful that as interest rates come down, there would be more credit and buying. “And I am also hopeful that prices adjust in a way that encourages people to buy.”

Rajan added: “My sense is that there is a little bit of everything that needs to happen… There is an issue of certainly how they (buyers) see the housing market and how they see prices. There has to be an adjustment so that more people want to go and buy.”