Realty Sector Post DeMo: Are Builders Still Facing the Heat?

Well, if we look at numbers then it is true that builders continue to feel the heat of DeMo. For majority of them, sales are yet to pick up the same momentum as what it was earlier. Without mentioning the brand name, a builder in Bengaluru saw a whopping 85 per cent drop in sales volumes over the last 3 months as against the same period before DeMo. This number is definitely startling but they have high hopes pinned from the second half of 2017. He reiterated that the Union Budget 2017-18 has given them the much-needed respite from their agony. However, there continues to be certain challenges that they face.

Major Challenges of Builders

  • ‘Real’ Buyers expect Price Correction: The major challenge faced by builders today is to clear their unsold stock. Just when they thought that the realty market was on a revival mode, there came a speed-breaker in the form of DeMo. The fence-sitters once again took a backseat in anticipation that prices will fall in the coming months. And this wait-and-watch policy adopted by the ‘real’ buyers has had its impact on the sales registers of builders. Needless to say, demand for housing continues to dominate the property spectrum.
  • Unrealistic Demand of Buyers: Some buyers, in the present scenario, have become very unrealistic while negotiating with the builders, thereby making it extremely difficult for the latter to make a sale.
  • ‘Cashless’ Labour is scarce: During the initial days of demonetization, paying the labour at construction site through cash became a major challenge as builders themselves got ‘cash-starved.’ Thereafter, despite the ‘cashless’ appeal of the PM, several labours at site are still apprehensive to adopt the newer trend of payments. While things are gradually improving, it is still a long way to go.
  • Land Acquisition More Tedious: More recently, the clean-up act in the Union Budget 2017-18 has restricted cash payments above Rs 3 lakhs under all circumstances. While it is a well-intended move, it might pose a challenge for builders to acquire land as landowners conventionally preferred a large amount of cash transactions.
  • Builders lose on buyers: While the government is trying to eradicate black money and builders too want to do all dealings in cheque, there continue to be few buyers in Tier 2 & 3 cities who are offering large cash components. The builders, on their part, are refraining to address such buyers. As a result, they pose the challenge of losing on these customers.

Under all circumstances, it is imperative that builders remain calm and not adopt unscrupulous means of selling their unsold stock.

 

 

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