The reality check on real-estate inventory shows that many flats built in metros remain unsold for longer duration, hitting the bottom line that the middle class is unable to buy them and the rich refuse to put in their money, while the government refuses to reduce tax on them.
The alarming rise in the number of unsold flats in six major cities is quite alarming though neither the industry nor the government admit the fact, according to a report by Liase Foras, as quoted in DNA.
A whopping 6.88 lakh units in the January-March quarter were unsold despite banks making much ado about easing home loan rates by a pittance and the government increasing the service tax by 2% and several municipal taxes vying for their share in the middle class boom.
The report released by Liases Foras, a real estate rating and research company on Tuesday, shows New Delhi, including the NCR, on top with unsold 321.68 million square feet, followed by Mumbai at 192.27 msf, Bangalore at 152.43 msf, Pune at 70.64 msf, Chennai at 64.03 msf and Hyderabad at 52.05 msf.
The problem is none of the stake holders are willing to budge. The builders are holding on to their high prices while the buyers are mortified at the skyrocketing prices with recession gradually setting in its ugly head.
Inventory levels in all these 6 metros in the last quarter increased by 2.48% to 6.88 lakh units, measuring a total of 919 msf area. Any inventory of more than 36 months is an indication of recession setting in. Delhi tops the list with 71 months of inventory.
Mumbai stands high at 46 months of inventory, which means the key business capital of the country is giving the wrong signals to the economy that is on the wane from high expectations of last year when Modi government took over.
In terms of price decline, Mumbai witnessed insignificant fall at 2.18% maximum while Pune showed an increase of 1.38% from the previous quarter, said the report.
Bankers blame builders for not passing on benefits to customers despite falling bank rates. They also cite the fact that the greedy builders and investors are eyeing high-end customers and ignoring the middle class or low-end buyers.
“The developers kept on launching spacious units. This is why price-sensitive people, the lower end of spectrum, are not buying. There is mismatch in what the market wants and what they are developing,” Ashutosh Limaye, head, research, Jones Lang LaSalle told DNA.
Unless the government comes clean on its taxation, the prices are unlikely to fall and eventually recession once sets in will ruin the entire industry. May be time to wait and watch now as the days of 2008 cash crunch that squeezed the global market is re-surfacing.