Realty Is Facing A Major Cash Crunch

Land prices in the national capital region (NCR), Mumbai suburbs, Bangalore and Hyderabad have corrected by up to 25% as property developers slow down their land purchases. Poor sales and lower availability of credit at higher cost have prompted property developers to end the mad rush to acquire land. Some of the developers have even backed out of land deals which were agreed upon as the slowdown hit the sector.
Prices have come down by up to 25% in Mumbai’s distant suburbs, including Thane and Belapur, and pockets of Hyderabad and Bangalore, according to property consultancy firm Knight Frank India. Prices in the NCR, with an exception of Faridabad and Delhi, too have witnessed a correction of up to 25%. Land prices in Faridabad have risen 10-30% in the past 3-4 months.
However, Faridabad is just catching up with its neighbouring locations. The prices in Faridabad are still lower than in Gurgaon or Noida and the current price rise is more towards building parity with them. Land prices in Delhi are said to be stable.
But a recent land deal struck in Delhi’s prime commercial centre Connaught Place indicates that prices in the capital too are cooling off. Parsvnath Developers bought 1.18 acre, jointly owned by Mahajan Industries and Videocon Industries, for Rs 200 crore. The deal came at a discount of almost 17% at Rs 169 crore per acre, compared to what hotel major Leela Group paid for acquiring 3 acres in Chanakyapuri last year for Rs 611 crore.
Mr.Vipin Aggarwal, Executive director, Omaxe, says “Real estate sector is facing a major cash crunch. That’s why the companies are focusing on completing the project at hand, instead of adding to their landbanks”.
Till recently, real estate players were in land acquisition frenzy, with some players even pledging their equity shares to acquire land. A large landbank was showcased as the biggest asset for a company tapping the capital market