NEW DELHI, January 18: The real estate market has slipped into a state of inertia, as investors defer decisions about property till the political situation clears.This, coupled with factors like an overall liquidity crunch, the income tax authorities' recent crack down on tax evaders (which sucked out a considerable amount of black money) and a prolonged depression in the real estate market, has served a serious blow to even well-established real estate agents.
Arvind Khanna, executive director of the multinational real estate consultancy firm, Richard Ellis, says the impact of a combination of all these factors seems more pronounced in the upper segment of the market. Even rock bottom prices in this segment have failed to enthuse property buyers.
"If we were earlier finalising, say, ten major property transactions in a month, the figure is down to just one or two," he says, adding, "these, too, constitute only the desperate sales where the buyer just can't afford to defer his investment decision any
further and the seller desperately wants to get rid of his property holding for some urgent finances."
In case of the local building industry, the much-awaited nod for permitting the construction of a third floor, which was expected to provide a new lease of life to the out-of-business construction firms, has been delayed due to the elections.
Says Yog Raj Arora, a south Delhi consultant who is also attached to the Delhi Developers' Forum (DDF) that represents the builders' community: "The Malhotra Committee's recommendation was to be implemented within a month of its acceptance by the Union Ministry of Urban Affairs. Even after a lapse of two years, however, a formal notification is nowhere in sight."
A majority of the builders, according to him, are holding on to their plots and single storey houses in a hope that by the time the proposal gets cleared, the market situation will also improve so that they can profit from the deal. "If a structure here or there is coming up, it is only because some
people want to keep their money rotating in the construction business itself," he adds.
Elections, political instability, a sudden change in government policies and even the annual budget have always affected the real-estate business. Furthermore, a change of guard both at the Centre and the state level often heralds a significant change in government policies concerning private and public investments, all major investments are generally put on hold till the new government makes its stand clear on such issues.
Though in a volatile market, the investors always face the risk of ending up paying more for the same property by putting off their investment decisions, they usually weigh the risks and possible advantages of deferring their decision. A spokesperson at the Chesterton Meghraj, another multinational consultancy firm, says: "this time, however, the investors seem secure in the belief that the prices will remain low in the coming months, if not crash further."
The all pervasive sentiment doesn't seemto have affected the rental market as, according to Khanna, the rental business is going on as usual.
Sudhanshu Tandon of Colliers Jardine, however, takes a postive view of the situation. Says he: "The need based market is always there, since those who need to buy property will do so under any circumstances - polls or no polls."
The long term impact of the Voluntary Disclosure of Income Scheme (VDIS), he feels, will be positive on the real-estate market since it will encourage transparent deals without any black money component that was once the mainstay of the real-estate business. Those not so optimistic are, however, keeping their fingers firmly crossed.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
