Real estate in AP plunges with falling demand

Are Siva Reddy said that there is no demand in Andhra Pradesh, including in the industrial town of Visakhapatnam. Buyers have become scarce and it looks as if they will become scarcer as the economy is cooling.

Real estate

HYDERABAD: The real-estate market in Andhra Pradesh appears to be treading rough water in the past few months, with buyers hard to find, even as developers hustle to get a key raw material, sand, in some districts, industry sources said on Tuesday.

Are Siva Reddy, chairman of the AP unit of Credai, the lobby of the real-estate sector, said that there is no demand in Andhra Pradesh, including in the industrial town of Visakhapatnam. Buyers have become scarce and it looks as if they will become scarcer as the economy is cooling.

Reddy said that developers were offering a discount of up to Rs 500 per sq foot in Vijayawada and Visakhapatnam to potential buyers, but still buyers are hard to find because potential buyers have become anxious about their jobs and their capacity to repay.

According to the owner of a residential real-estate development company in the port city, apart from a reducing buyers’ pool, the other problem faced by developers is the rapidly receding access of sand, a critical raw material in construction. He said that the developers in the city do not have easy access to sand, which is impacting construction schedules.

He said that potential buyers were becoming hard to come by in the city as wages have remained stagnant and mortgage companies were getting tight-fisted with mortgage disbursals. A developer said that no new jobs are being created in the city, and much of the earlier generations have already bought a flat or a house some years back.

Reddy of Credai said that many residential projects in most of the major towns in AP have gone slow on their work because of cash-flow problems and the paucity of sand in many towns. The state government has promised to unveil a new sand policy by 5 September which will help in buying sand at viable prices, but the key problem still remains that there are no buyers.

Reddy said the developers were also unable to sell their ongoing projects to new developers because the market had softened to a large extent. The government should create an industrial policy that will stimulate the economy. Currently, the country is facing one of the toughest periods in the real-estate market.

It appears that Andhra Pradesh is not alone in facing turbulence in the housing market.

According to Anuj Puri, chairman of the Mumbai-based Anarock Property Consultants, a real-estate consulting firm, the ‘golden years’ of Indian residential real estate are well and truly over, at least in the short to mid-term. The sentiment of end-users as well as investors who previously banked heavily on residential real estate for maximum returns is seriously curtailed.

In a statement on Tuesday, Puri said that, the housing sales soared to 3.5 lakh units in 2014 (the best between 2013 and 2019) but fell to a mere 2.1 lakh units in 2017, immediately post demonetization. Homebuyers perched themselves on the fence, awaiting more favourable market trends, and investors backed out completely.

He also added that while radical reformatory change was indeed required, these unaccustomed reforms caused an upheaval from which the Indian housing market has yet to recover. Home sales are seriously low and have not rebounded to their earlier peak levels. Though there was some light of revival in 2018, current housing sales trends indicate that they are unlikely to rally back to their peak levels anytime soon.

Source: ET Realty