Realty sector looks up

Industry comes out of recession, banks start giving home loans

The real estate market is slowly moving towards stability, as sales have started picking-up, and developers are now mulling over launching new projects.

Banks, which have been hitherto shy in giving home loans, have also increased their exposure to the real estate sector. Prices across segments have increased by 2-5 per cent in the last two-three months.

According to data available with the developers, bank credit to home buyers have increased by almost 60 per cent in the last three-four months. In July this year, home loan credit by banks in Kolkata and adjoining areas was close to Rs 160 crore, against Rs 100 crore in March.

Yet, developers are still cautious in launching new projects, as they think it will take some more time for the demand to touch peak levels.

Jitendra Khaitan of Pioneer Properties said, “The demand in the real estate sector had touched peak levels between January-March 2008. We are close to 80 per cent of the peak levels. One can expect property prices to rise by another 10 per cent in the next few months.”

Also, the fallout of Vedic Village controversy may have some dampening impact in the commercial real estate sector, admit developers. “The recent events certainly will have some negative impact on the commercial real estate sector,” said Pradeep Sureka of the Sureka Group.

Already, the projected IT hubs of the state, at Rajarhat and Sector V, is grappling with vacant spaces and slowdown in the construction activity.

Harshvardhan Neotia, chairman and managing director of Ambuja Realty, said, “There are signs of improvements in the real estate sector, but investors are still shying away. In the next six months or a year's time, we will see the sector to fully come out of the slowdown.”

In the last quarter of the financial year, construction activity in the real estate sector is expected to be pick-up significantly with generally favourable weather conditions and buyer sentiment looking up.

However, prices are expected to move up further, as input prices are gradually increasing, said developers. “Cement prices have increased by almost 20 per cent in the last three-four months. Steel prices have also increased by 5-10 per cent in the last month. These factors might led to a price escalation,” said Sureka.

Over the last two-three years, residential property prices in the area had gone up by over 50 per cent across Kolkata, and developers had anticipated more than 15-20 per cent rise by now, had the economic sloth not gripped the sector.