Builders, big and small, are suddenly turning to their fixers of the real estate industry – brokers. These shunned lot are suddenly being looked upon as favored brides, in an industry that is soon about to witness the Tsunami of Price Correction.
This has never happened before, and brokers are chuckling, since 2-3% extra commission on achieving targets can pack in a healthy balance sheet.
In fact, not only is there a 2-3% extra, but a discount of 10-15% is also thrown in to the price, which the broker can pocket for himself, should he wish.
The story of last 2 years has slowly begun to sour in Mumbai. The sex is over, it is refraction time for Mumbai’s building industry.
Builders are actually addressing the bull by the tail instead of the horns, and this is why there is a veil over the price falls. The actual correction is 20-25% if you take in to account the discounts of 15%, and the waiver of stamp duty, free parking included, etc. And this is just the beginning.
Big names like Hiranandani denies there is a correction. But then, this is a builder whose promoters have denied Rs 160 crore of provident fund to employees, and were recently in the news because of a CBI investigation. You cannot take their words seriously. The sales of flats at their recent project, Hiranandani Meadows, Thane, has been relatively slow.
There are denials from Mukesh Patel of Neelkanth Developers and Sunil Mantri of Mantri Developers. Mantri said he got 2000 inquiries and has sold 50 flats already. However, even he had to come up with a discount scheme:
- Just 5 days to save Rs 3,65,700! At Mantri Park Goregaon, 1BHK & 2 BHK apartments. Consider savings in stamp duty as additional sweetener. Rush! This offer is valid only upto [sic] April 13, 2008 or first 51 customers
Let us look at some other advertisements that belie the weakness in the housing industry:
- Rs 300 off per sq ft only up to 20 April 2008. Lok Housing, Mumbai
- Pay 20 percent now and 80 percent on possession. Nahar Amritshakti, Mumbai
- Free modular kitchen, free parking, free interiors, stamp duty relief. New Delhi
Then comes the case of Orange Properties, which is a car-offer specialist: It gave Maruti SX4s to people who purchased an apartment in their Bannergatta project, and earlier the same company gave Audi A4s, each worth Rs 30 lakh, for those who booked villas in their Magnolia Brooksville project.
The collective desperation of an industry is slowly unveiling itself. Just one straw is required to break the camel's back. What will it be? The CRR rate hike -- not this one, but the balance 0.25% which has been held in abeyance for April 29, 2008 -- or the relentless surge in prices of oil, rice, wheat, pulses and metals -- in other words, soaring inflation. Or, will it be the Supreme Court coming down hard and justly on builders for violating the Private Forest Land?
Whichever it may be, the real estate industry is in for a real shock.