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News & Views on Indian Real Estate

Wednesday, October 29, 2008

Parsvnath's Festive Sales Down By Half


Sales at Parsvnath Developers' in the festival season of Diwali are down to half from a year ago, but the company does not plan price cuts to boost sales, its chairman said. High interest rates on home loans and central bank rules forcing banks to assign a higher risk weight to real estate loans have dented property demand in India. Analysts say property prices are still high and need some correction before demand picks up. But Parsvnath has no such plans, Mr. Jain said, citing rising input costs. The company would instead focus on reducing costs by reducing salaries and firing 'non-performing staff,' and would speed up projects to improve cash flows, he added.

Pawan said...

Real estate people are idiots. They are behaving like ostriches with their head in the sand and refusing to recognize the new reality. And the new reality is - house prices have grown beyond the reach of most people. But realtors still believe cutting home loan rate will set the ball rolling again. By this logic, with the FED rate cuts, the US stock and property markets must have been booming by now.

The plain and simple fact is that real estate like all other businesses is cyclical. And after a good up trend fueled with foreign money, it has fallen in a downward spiral. Even if home loan rates come to below 5%, realty will not pick up for the simple reason that prices are unaffordable. Unless house prices fall by 25-50% nothing will happen. And that will take time. The real estate cartel can delay the process but they can not change the inevitable. The sooner they wake up to reality, the better for them.

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