Thursday, 20 November 2008

Real estate companies likely to face rough weather: R Money

Acoording to Reliance Money, atleast for the next 12 - 18 months, real estate companies are likely to face rough weather.

Sector Outlook:-

Drying up of volumes, liquidity issues along with rising input cost is a curse to real estate companies. Inspite of these issues developers are not ready to reduce the list price. However indirect reduction in prices through discounts and freebies are part of the transaction. Real estate companies are taking several cost cutting measures to improve their margins in the face of the global economic turmoil. Most of the developers are now focusing towards Lower Income Group (LIG) and Middle Income Group (MIG) housing segment (Affordable housing). Also the focus has shifted from accumulating land to execution of current projects. Most of the developers are keeping away from launching of new projects. Malls rental rates are also expected to rationalize. In commercial space focus has shifted from IT/ITES commercial development segment to non IT/ITES commercial development as slowdown is expected in the sector. It’s time for the developers to recalibrate and reprice their products. On the other side buyers are in “Wait & Watch Policy” and are in no hurry to entry any transaction. We expect Q3FY09 will be tough ride for real estate sector. Decreasing commodity prices and interest rates will help the sector get rid of dark clouds in medium to long term. However atleast for the next 12 - 18 months, real estate companies are likely to face
rough weather.

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Source: Moneycontrol

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