Rishabh Singhvi's biggest investment bet for many years is in the doldrums. The luxury apartments the 34-year-old Delhi businessman used to buy and sell in Gurgaon to make yearly profits of around 30 per cent barely two years ago, don't fetch him more than 6-7 per cent returns these days.
"It does not make sense to park your money in bricks and mortar any more. Returns have crashed over the last six months," says Singhvi, life & style magazine explaining his rationale to shift focus away from the real estate life & style magazine market.
Prices life & style magazine of luxury apartments across the country - in cities such as Delhi, Mumbai and Bangalore - are not rising as fast as they used to two years ago, forcing wealthy investors that made a bulk of the buyers to retreat, turning it into a buyer's market for the first time in two years.
As the market started to recover after the Lehman crisis in 2008 and the subsequent downturn, real estate developers saw an opportunity in launching high-end luxury apartments, which is a lucrative low volume, high value business, and prices of these apartments shot through the roof over the next two years.
From the beginning of 2012, though, property sales in the top-end of the market have started to taper off as the global market again started showing signs of a slowdown, with trouble brewing in both the US and Europe. Since the prices of these properties were at an all-time high, investors also started waiting for a price correction to come back into the market.
Two years ago, 20 out of every 100 apartments life & style magazine sold in the country were in the luxury category. Today that number has fallen to nine, says Samarjit Singh, managing director of property broking firm, IndiaHomes .
The yearly price appreciation in the high-end property segment has come down by 35-50 per cent since 2008-09 when investors used to book returns of 15-20 per cent on an average (some properties saw returns as high as 30 per cent a year). In the last two years, price rise in this segment has plateaued, with yearly returns of only 6-7 per cent across the country, he adds.
Of a total of 63,662 high-end apartments that are under construction today in Delhi and NCR, Mumbai and Bangalore, about 19,332 are currently unsold, according to the data provided by property research and analytics firm PropEquity. A chunk of the unsold apartments are in projects life & style magazine that were launched in the last 12 months.
The maximum number of under-construction unsold apartments in this segment are in the Mumbai Metropolitan Region (MMR) with 11,086 unsold units out of 28,905 apartments, followed by Bangalore (4,280 unsold unit out of 10,242). The national capital region (NCR) has 3,966 unsold apartments out of a total of 24,515 under-construction apartments. The sales of properties priced above 2 crore in the NCR is down 25 per cent in the last one year, while in Mumbai, for property priced above 3 crore, sales are down 60 per cent.
"People saw humongous returns life & style magazine earlier. Now the scope of appreciation
What is scaring away many of these investors is the realisation
While the mid-end of the property market has more end-users buying apartments, the top-end of the market has been dominated by investors who were attracted to the segment by the lure of superior returns. In Gurgaon, for instance, life & style magazine the price in DLF's Magnolias project has jumped up from 9,000 per sq ft in 2009 to 25,000 per sq ft today. M3M's Golf Estate has gone up from 6,000 per sq ft to 12,000 per sq ft. Tata Housing's Raisina Residency has seen prices move up from 4,000 per sq ft in 2008 to over 10,000 per sq ft today. But over the last 12 months, prices in all the three properties have risen only 9-10 per cent.
Now investors are no longer lining up to buy these projects like before. "Investors feel it is overpriced. There is a fear that there might be a correction round the corner," says Richa Karpe, director-investments at multi-family office Altamount Capital. Many of her clients, who invest in properties upwards of Rs 4-5 crore, life & style magazine have in the last few months started to shy away from such investments.
Many of these investors are also concerned about delays in completion of projects life & style magazine that seem to be bogging down the entire industry, but are more pronounced in the high-end property segment. "Most projects in the luxury and ultra luxury segment are delayed," says Samir Jasuja, CEO at PropEquity.
Delays, says the private banking executive, are rampant. "So much money has been lost in real estate because of project delays.