Saturday, May 17, 2008

Land price correct all over the country

Now that the acreage cost seem to be dropping, the sq/ft price drop should follow.
Economic times reports...

Land prices in the national capital region (NCR), Mumbai suburbs, Bangalore and Hyderabad have corrected by up to 25% as property developers slow down their land purchases. Poor sales and lower availability of credit at higher cost have prompted property developers to end the mad rush to acquire land. Some of the developers have even backed out of land deals which were agreed upon as the slowdown hit the sector.

Prices have come down by up to 25% in Mumbai's distant suburbs, including Thane and Belapur, and pockets of Hyderabad and Bangalore, according to property consultancy firm Knight Frank India. Prices in the NCR, with an exception of Faridabad and Delhi, too have witnessed a correction of up to 25%, says a senior Unitech executive, adding that transaction volume has dried up. Land prices in Faridabad have risen 10-30% in the past 3-4 months.

However, Faridabad is just catching up with its neighbouring locations. The prices in Faridabad are still lower than in Gurgaon or Noida and the current price rise is more towards building a parity with them. Land prices in Delhi are said to be stable.

But a recent land deal struck in Delhi's prime commercial centre Connaught Place indicates that prices in the capital too are cooling off. Parsvnath Developers bought 1.18 acre, jointly owned by Mahajan Industries and Videocon Industries, for Rs 200 crore. The deal came at a discount of almost 17% at Rs 169 crore per acre, compared to what hotel major Leela Group paid for acquiring 3 acres in Chanakyapuri last year for Rs 611 crore.

"Real estate sector is facing a major cash crunch. That's why the companies are focusing on completing the project at hand, instead of adding to their landbanks," says Omaxe executive director Vipin Aggarwal.

Till recently, real estate players were in a land acquisition frenzy, with some players even pledging their equity shares to acquire land. A large landbank was showcased as the biggest asset for a company tapping the capital market. "Most real estate firms have formed big landbanks. So, there is hardly any need for them to go for further acquisition, especially in these times, when money is expensive," said Anshuman Magazine South Asia chairman CB Richard Ellis. Developers are also showing lower interest in agriculture land, once their prime target because of the substantial margins it offered.

At the same time, given the slowdown in the sector, some of the land deals which were earlier agreed upon have also fallen through. "The situation has completely changed since January. The developers are now exiting the deals because they do not think that the project can fetch them the profits they had originally expected," says Knight Frank India chairman Pranay Vakil. The correction is more pronounced in plots of less than 25 acre in size, since they are not FDI-compliant. "For a larger piece of land, there is FDI. But for smaller size projects, there are very few takers," he adds.

1 comment:

Param said...

I don’t agree that real estate market is down and not giving the profit. It may be possible that real estate market is down these days but it is one of the best and booming sector in India as well as in Delhi. the demand of commercial properties and residential properties are increasing day by day.

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