No end in sight for Bombay price fall
There seems to be no bottoming out in the slump in Bombay's real estate prices, which have been sliding since the second quarter of 1995.
Prices have fallen to barely 60 per cent of the March 1995 levels.
Several corporates - such as Mahindra & Mahindra (M&M), Lloyds Steel, Videocon, Godrej and the Great Eastern Shipping Co (Gesco) - which made a foray into the property sector at the height of the boom between 1991 and 1994, are desperate to sell flats in projects launched after 1995.
Not that they were willing to say they had a problem on their hands. They said their names guaranteed quality and reliability.
'It is our brand name that carries weight with people, because we are delivering quality,' V.K. Sheth, executive director of Gesco, said. 'We have had no problem selling flats in our projects.' Officials of M&M Realty said Phase 1 of their Ghatkopar project, in northeastern Bombay, was almost sold out.
Gesco's real estate managers said demand was good for their 21-floor GE Royale at Tardeo, central Bombay, and another residential building nearing completion in Juhu, in the northwestern suburbs.
However, some companies that accepted down payments for flats are having difficulty collecting the balance.
'Recoveries have become a major problem,' said S.D. Kulkarni, general manager of Videocon Properties. 'Since rates have fallen, people are reluctant to pay the balance due, at the old booking rates.' Leading corporate houses are all feeling the pinch, and resorting to hard-sell tactics to recover their funds.
Godrej Properties has tied up with the Housing Development Finance Corp, and is offering to pay some of the interest charges on loans for selected properties.
The same tie-up and concession has been offered by M&M for their Kalyan and Ghatkopar projects in Bombay's far-flung northeastern suburbs. But the response has been tepid, at best.
Lloyd's has sold back six of its seven plots in Kharghar, in New Bombay (the satellite city across the harbour) to the City and Industrial Development Corp.
Another problem the corporates face is criticism from real estate agents who say while quality was generally acceptable, time schedules were not being adhered to.
'Many of these projects are way behind schedule; and all sorts of ingenious excuses are being trotted out for the delays,' Indravadan Desai, a real estate broker, said.
Despite the continuing slump, though, none of the corporates are considering pulling out of the real estate market. They feel that given the shortage of residential accommodation in Bombay and the steady influx of people into the metropolis, it is only a matter of time before the situation improves, and prices start to move up again.
Until then, they are biding their time, and trying to ride out the hard times.