Under Construction
According to the CEO of Kotak Realty Fund S Srinivasan, the real estate sector could witness a turnaround in the next two quarters and would see fund flow after that. “It will take at least two quarters before the fund flow to estate developer community begins, and the sector can witness a turnaround,” he said yesterday at a seminar organised by the Gujarat Chamber of Commerce and Industries in Ahmedabad.
“Kotak as a leading realty fund has corpus of Rs 3,500 crore to invest in real estate deals even at the land acquisition stage, out of which so far we have invested Rs 1,200 crore,” Srinivasan added by saying that they intend to invest the balance in the next one to two years. India has been witness to excesses across all sectors in the last three years, including real estate and it will take sometime before the sanity is restored, Srinivasan said. He highlighted the opportunities and challenges in finance, banking for the real estate sector, “as developers we should work in coordination with planners to regulate the frenzy in construction of shopping centres.”
Fortunately or unfortunately the ‘frenzy’ in construction has come to a grinding halt across India due to the sudden drop in demand for both residential and commercial properties. High labour and material costs have also added to the woes of the Realty developers. Not to mention the non-existent cash flows.
According to Srinivasan, the government should impose restriction on construction of malls within a specified catchment area.
I agree Mr Srinivasan, I recently heard of a mall coming up in Greater Kailash in New Delhi, where is the space? GK is already a highly congested area with bad traffic. Doesn’t Delhi have enough malls already? Another important question to ask is, will the coming up malls even break-even? Most existing malls are running into heavy losses with the exception of Select City Walk in Saket.
There is no doubt that currently the real estate sector is in trouble and it will take some time to recover. Experts suggest that realty prices should bottom out in 2009. For those looking to invest, this year should provide many good opportunities. For those already invested, it’s a game of patience assuming that you have the holding capacity. In the real estate businesses past success stories are generally not applicable to new situations. We must continuously reinvent ourselves, responding to changing times with innovative new business models.
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