Fresh reality investment plans take a hit: Assocham

Fresh investment plans in the real estate segment have taken a plunge of about 82 per cent between the first and the third quarter of the current fiscal showing a slackness in demand in the housing and the commercial sectors, an industry survey has said.

Reality firms went ahead with investment announcements of Rs 1,15,326 crore in the first quarter of fiscal 2008-09, while the investment intentions, tracked by the 'Assocham Investment Meter'(AIM), saw a sharp drop to a mere Rs 22,482 crore, down by more than 82 per cent at the end of third quarter this financial year.

The slowdown in the demand for the housing and commercial space was visible in the second quarter itself. But the situation became worse for the period October-December this year, the AIM revealed.

Investments in the real estate sector declined from Rs 1,15,326 crore in the first quarter to Rs 36,400 crore in the second quarter owing to tightening of the monetary policy, resulting in high interest rates and fall in demand. With announcement of policy actions and lowering of the key rates by the Reserve Bank of India (RBI), investment may revive in the reality sector.

"Even though the real estate sector investment plans have dried up considerably, the policy actions announced by the government and the RBI are likely to act positively in reviving the demand and address the funding problems of real estate players" Assocham President Sajjan Jindal said.

The chamber said the main challenges remain on the demand side affected by the business confidence. The residential demand could improve due to lower interest rates. The policy actions like cheaper home loans up to Rs 20 lakh may push up the demand, it said.