Real Estate Market Is Caught In A Vicious Cycle, Says Pankaj Kapoor
High costs involved in land, capital and finance have rendered builders unable to sell units at lower prices.
The real estate market has reached a stage where high costs involved in land, capital and finance have rendered builders unable to sell units at lower prices, according to Pankaj Kapoor, Managing Director of Liases Foras.
“The high cost of capital, high cost of land has increased the selling price so high that it is unattractive. So, the consumer can’t really purchase and the builders are in a fix that the high cost is not letting them sell at a lower price,” he told BloombergQuint in an interview. “Consumer affordability does not match that price.”
Kapoor said the whole real estate market is caught in a vicious cycle because of the trends set in 2005 where land cost grew nine times, while the selling price of apartments grew four times. “This led to a seven time increase in finance cost to the developer, and gestation period in sales increased too.”
With the total value of unsold units at Rs 1 lakh crore for the 27 listed realty players, Kapoor said the sales remain muted because prices of units have grown three times while supply has doubled since the collapse of Lehman brothers in 2008. “Builders’ commitment to build has increased three times since they have introduced more supply in the market along with increased prices and low growth in sales.”
Watch the full conversation here: