Chennai: Real estate developers may have to rake up sales by 2.5 times to service their existing debt that has trebled in the last decade to Rs 4 lakh crore, a report has said.
Released by real estate and analytics company, Liases Foras, the report states that the existing scenario signifies that the industry is at an inflection point and is staring at long-due price correction in order to improve sales.
However, there is a scope to bring down prices, as to service this debt, developers may have to double their sales, keeping costs low or even cut some margin, the report said.
The report examined performance of close to 11,000 developers and noted that out of Rs 2.4 crore of business, the top 90 developers in the country accounted for about third of business, generating Rs 78,879 crore.
As per the report, while debt and inventory have grown monumentally, sales have not gone up in the same proportion. “Having borrowed money from different sources, developers kept adding housing stock without any productivity. Since sales remained abysmal all this while, developers are finding it difficult to meet their debt obligation at this point,” said the report.
The issues surrounding Infrastructure Leasing & Financial Services (IL&FS) and other factors that subsequently happened has put realtors in a tricky position at present.
In the past decade, while the value of housing sold stock increased by 1.56 times, the value of unsold stock increased 4.72 times. In terms of units, sales volume rose 1.28 times while inventory increased 3.33 times between 2009 and 2018, the report noted.
In the same period, lending to the real estate sector rose to Rs 4 lakh crore from Rs 1.2 lakh crore.
As per the report, the residential market generated Rs 2.4 crore as yearly revenue in 2018. Top eight cities including Chennai, cornered more than 80 per cent of the entire business. Of the total of Rs 2.4 crore, the top eight cities generated Rs 2.15 crore as revenue, it said.