Liquidity may have improved in the real-estate sector but builders can derail the recovery by increasing prices too fast, cautioned Mr K.K. Raman, Executive Vice-Presidenti DLF Homes, at a panel discussion during the Second Annual Convention of the National Association of Realtors - India.
Developers should keep in mind the continued slowdown in the US and the economic concerns in Europe, both of which could have an impact on the real-estate sector here. The IT sector is a major driver of housing demand in the domestic market and there is need for caution. Housing demand is usually affected when other major sectors are hit. Builders should not increase prices in haste, optimism on this front can cause problems, he said.
The other major concern will be on timely project execution because of labour shortage. At the panel discussion on key trends in the real-estate sector, leading builders said developers will be cautious on building up land banks, joint ventures are more likely to be the order of the day, right pricing will be a key issue and the affordable segment will continue to see major activity.
NEW AREAS
Mr Y. Meera Reddy, Managing Director, SKCL, a leading developer of commercial space, said that opportunities would emerge in the education segment, healthcare, hospitality, warehousing and logistics. These would be new areas which developers can address, he said.
Mr R. Kumar, Managing Director, Navin Housing, said buyers can safely bet on the residential segment as an asset class. The affordable segment of housing (primarily represented by the Rs 20-35 lakh range) represents the chunk of the market.
There is an even bigger segment in the lower priced segment in the Rs 10 lakh range that the Government is concerned about. But land pricing and infrastructure facilities are a limitation to tapping this segment, he felt.
Mr Sandeep Mehta, Managing Director, Jain Housing & Constructions, agreed that the affordable segment would represent the most potential for developers. Office space absorption is also bound to pick up in the first quarter of 2011. Healthcare and education segments would also present business opportunity for developers.
In the context of the shortage of labour, developers will increasingly look at new construction technologies that would speed up project implementation.
LOCKING UP CAPITA!
With project sizes increasing steadily, developers would be more cautious about locking up capital in land banks. Mr Kumar pointed out that during the last decade, the Chennai market has grown from development of a few plots at a time to a few acres and now to integrated townships.
Based on the experience of the slowdown in the last two years, developers have realised the risk in locking up funds in land, which is an ‘illiquid’ asset. Developers should invest in land only if they have immediate plans to develop the property, Mr Reddy said.
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