The current slump in the real estate market is largely due to the moving away of investors from the sector, particularly non-resident Indians (NRIs), say real estate consultants.
Capital values and rentals have been dropping in most major cities and across all property sectors, including residential, commercial and retail premises. This followed a boom in the real estate market in 1994-95. The boom was partly attributed to the massive investment by NRIs in the sector.
Executives in Colliers Jardine and Richard Ellis said yesterday that because of political instability and the not-so-good economic situation, investors have almost been eliminated from the real estate, leaving the field for genuine users.
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The main reason for the slump in the real estate market is the lack of liquidity in the market, Arvind Khanna of Richrd Ellis said. Added to this is the fact that the large investments made by several corporate houses is stuck there and is aggravating the liquidity crunch, Khanna said.
He said the trend would continue till the country becomes politically stable. He, however, hoped that the much-touted Voluntary Disclosure of Income Scheme (VDIS) would a positive impact on the market.
However, Sudhanshu Tandan of Colliers Jardine was not so optimistic. He said the slump would continue for 12 to 16 months.
They, however, did not see any impact of the crash of the real estate market in South-East Asia on the Indian market. If anything, the impact will be positive. More investors will look forward to investing in India. But since foreign direct investment is not allowed in the sector, its scope will be limited, Khanna added.