Real estate transactions reel under inflation

The pace of registration of lands and buildings, which reflects the market sentiment of real estate, has been stagnant in Hyderabad and other major cities in the State. This projection of a slowdown in real estate transactions has come straight from the horse’s mouth. The Registration and Stamps Department has recorded just a 2.25 per cent increase in sales this year till May 2008 in the State.

The verdict is clear. Among others, rising inflation coupled with hike in interest rates by banks to control the price spiral has hit hard where it matters most. These developments have kept a large chunk of the middle class, the prospective buyers who make up for large numbers, away from pushing further with real estate transactions.

Officials privy to Registration and Stamps Department point out that this trend of market slowdown is more visible in all the urban areas like Hyderabad and its surrounding areas, Visakhapatnam, Guntur and Vijayawada. In fact, the coastal cities have registered a decline in percentage of sales this year till May 2008.

This all-pervading crisis is due to several other factors as well. “The speculative business and subsequent huge investments in real estate has come down.

There is a definite lack of urgency and excitement in the sector and sales are just about stagnant at this moment,” says Commissioner and Inspector General of Registration and Stamps B. Aravinda Reddy.The number of documents received by the department for registrations from Hyderabad and neighbouring Ranga Reddy District has gradually come down. “Prices of real estate and input costs in the city have increased tremendously in the last few years. Inflation and home loan rates hike has added to the woes. The middle class apparently seems to have decided to wait and watch,” says G. Q. Haqqani, Hyderabad District Registrar. Latest figures from the Department of Registration and Stamps point to a growth of just 0.12 per cent in Hyderabad, Ranga Reddy and other nearby districts. Last year, till May-2007, number of sales was at 63,672 and this year till May, the sales are just 63,747.The situation is even worse in coastal cities like Visakhapatnam, where the real estate is clearly on the decline. Till May 2007, at Visakhapatnam and surrounding districts, the sales were 24,066 and this year till May 08 the sales have come down to 20, 802, a decline by 13.56 per cent.

Those familiar with the sector also inform of having come across a few cases wherein the small builders are desperate to sell off their half-completed ventures to bigger ventures.

“The input costs have increased by 25 per cent to 30 per cent and suddenly small builders are finding it tough to complete projects,” they aver.

“The home loan rate hike by banks has hit the middle class hard. Buyers who previously had plans to go for loans now have second thoughts about it. Apart from this, inflation and rise in prices of cement and steel has hit us builders hard. We are just waiting for the year end when things, hopefully, would improve,” Y. Rajendra Prasad of Ramya Constructions in Visakhapatnam.

Commissioner of Registrations and Stamps feels that the hype and hoopla of 2005-06 in the real estate sector has come to an end. “We had record collections in the last two years. Generally, people go for registrations during year end and hopefully things would improve by Durga Puja. Presently, all the coastal cities are showing a decline in sales while in Hyderabad, the sector is stagnant,” Mr. Reddy said.