145;All trying to catch the bottom146;

For a self-user, there are still options for buying. Apartments in Greater Noida, Noida are available and the consumer can get a good concession that was not available before. The problem is that everyone is trying to catch the bottom, and that is what needs to change. Prices may or may not drop further. Unlike the United States or the United Kingdom, we do not have 30 years old data that is available for prediction purposes. Forecasting is almost impossible in a market like ours, especially when fundamentals have changed. The kind of prosperity we have seen is unprecedented and yet, there remains so much poverty. Also, whatever data is available; it is difficult to verify its authenticity. Therefore, the consumer should not go by the expectation that prices will fall further, because there is no way to know for certain. At this time, it is of extreme importance that the consumer should act with diligence, foresight and make an informed decision. S/he must verify the long term prospects of an area and search around to determine if it is a good price.

8226;The top builders seemed to have ignored affordable housing as a distinct product line. This could have helpe them cope better during this downturn8230;

Well, that is almost like saying demand is maximum for bicycles and hence, there should only be more of bicycle manufacturers. A business is a business and will work according to market forces. The builders concentrated on a segment where there are much bigger margins simply because they are in a business. The issue is not only about there being limited margins under affordable housing but also limited paying capacity of consumers, that does not translate voluminous demand into effective demand. Absorption capacity is still low in this segment. Also, land prices have shot up and FSI Floor Space Index is high so how can affordable housing be provided when there are so many additional costs? If developers are going into affordable housing now, that is because the market is dictating their move.

8226;What about developers holding to the price line8230;

If prices reduce, they will do so because of market forces. And if the builders can get the government to provide them with some concessions, why should they reduce prices beforehand?

8226;Why are banks and private equity firms shying away?

Anybody who lends, wants returns. Risk is high and there is shortage of money. If the product is not selling and there is a question mark on the valuation, how will a financier put his money on real estate? Also, risk rating has increased on real estate from the government8217;s side.

8226;Builders and developers are in distress today. When will things change?

The largest problem faced by builders is that their sources of funds have almost completely dried up. One year back, a builder was getting money from massive sales, easy debt from banks, IPOs and from private equity funds. Now, sales are down, banks are refusing to lend, costs are increasing the private equity market is playing cautious. Basically, there is a serious dearth of funds. However, it is not the end of the world because a lot of projects are sold out for instance, in Gurgaon. It is the newly launched/constructed projects that are not finding buyers. Developers are switching cities. Those from Delhi and Mumbai have moved to other cities such as Hyderabad and Chennai.

Ultimately, real estate business is cyclical, even though it is a long cycle. Our per capita consumption remains low. Thus, the real estate market is small and undersupplied in every segment. If economic growth continues, which it will, there will still be demand. The short run is bad with there being excess supply. Eventually, demand will rise and the two will balance. India will recover faster, but only because it is at the bottom 8212; there is huge pent up demand in infrastructure sectors.