Impact of the Real Estate Downturn: Delayed Home Deliveries Galore
The real estate sector's slowdown is drastically affecting the timeline of numerous housing projects across the nation. The funds are beginning to dwindle, a soft demand clouds the horizon, and the prices of raw materials soar — all contributing to postponed project executions.
Lack of Funding and Falling Sales
Funding has become a rare commodity, and even for those developers who could potentially access it, the rates have escalated to unappealing levels. Moreover, revenue from housing units sales has declined, a direct consequence of softened demand. This statement was provided by Sanjay Verma, the Executive Managing Director at Cushman and Wakefield.
Central Bank's Response
The central bank has been incrementally raising interest rates as a measure to control inflation. This domino effect of high rates hits smaller and mid-sized developers particularly hard as they face greater difficulties in securing loans.
“It is a tough time for real estate firms. A weak demand is affecting cash flow. Moreover, the cost of debt and construction has risen,” says a senior executive at Omaxe, indicating the need for developers to adapt to the changing economic conditions.
Government Sanctions and Supply Constraints
Some developers attribute the unprecedented project delays to government sanctions or the lack thereof, and shortages of labor and materials, like steel which once became so scarce it could only be procured at exorbitant rates.
Strategic Delays
Some developers intentionally slow down construction to maintain property prices as demand wanes. Manoj Gaur of Gaursons identifies government approvals and raw material availability as hurdles. Despite so, Sanjay Verma of Cushman & Wakefield notes that delayed projects can inadvertently harm the early buyers, who face extended wait times for their dream homes.
Real Estate Outlook
The industry forecasts that the current scenario might stretch for at least one more year, due to expected persistence of high-interest rates, as shared by Verma.