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Builders in India Have Less to Celebrate This Year

By Allison Halliday | October 24, 2011

Diwali is imminent, and is generally a time for celebration for builders, as according to a report in the Economic Times, it usually comes at one of the busiest times in the building trade. However, this year things aren't looking quite so rosy as the industry has been hard-hit by double-digit interest rates, lack of consumer confidence and volatile markets.

Indian property markets are not looking good © Anna Polishchuk -

All these factors have negatively affected sales volumes, and some analysts are predicting a drop of as much as 25% to 30% in transaction volumes for the country’s six top property markets between now and December. If their gloomy predictions come true it could mark the beginning of a period of heavy discounting in order to improve sales volumes and cash flow.

At the moment builders are reluctant to drop their prices, while buyers are proving equally reluctant to purchase flats at their current prices, especially as interest rates are so high. Some property developers have introduced special festive incentives to try to tempt buyers, but these aren't looking too successful at the moment, and it looks as if buyers are waiting to see significant price reductions as opposed to sales gimmicks. This is likely to prove difficult for many developers to accept, as the festive season is generally when prices firm up and new projects are launched. However this year has seen few new launches, and prices and properties are failing to move.

Some towns within the National Capital Region which previously enjoyed good sales volumes are seeing constraints upon supply due to continuing action over land acquisition. Experts think sales volumes for mid-income housing should remain steady in these towns, but sales are likely to be hit wherever there are questions over land title.

A number of property developers say they are unable to cut prices significantly due to increase taxes and labour costs, and most feel that it is still far too early to predict how this season's sales will progress, remaining confident that demand for new homes is still there.

Allison Halliday is a Realty Biz News contributing writer. She handles International Real Estate and is a seasoned blogger.
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