Goa’s real estate market is rarely the pioneer in creating trends. The only exception was when our builders chose to anticipate demand for second homes and went in for resort housing as an investment option. It paid off. But, for the most part our investors and builders prefer to follow the trends from major urban centres in the country. This has resulted quite often in the local conditions masking the national ruling trends. Take for example the sales climate in Goa. The Goan real estate business is having a reasonably good time with adequate demand for built space and also fairly full order books. Contrast this with the unpalatable situation in major metros of India, particularly Mumbai and Delhi. Unsold inventory is piling up, despite a general climate favouring investments.
The real estate industry had faced a severe financial crunch in the days immediately before and after the parliament elections. At that time, the general expectation was that once the election gets completed, and a new government takes over, the investment climate will improve, and consequently the construction industry will gain momentum. Some green shoots were also visible in post election days. Sadly the enthusiasm has not been sustained. As against the usual festival season spurt in demand, the builders are left holding large unsold stocks of ready built housing units. The age of unsold inventory is growing, thus running the risk of having to offer severe discounts for getting rid of them. That would be a suicidal action, which will impact the credibility of the builder.
Are there better options? The demand for rental housing in large cities is still unmet. If the unsold property is rented out, a steady revenue stream can be created. Why should builders opt for such unconventional approaches? It is simply a matter of surviving an impending lull in the market. A major financial crisis of the type seen in 2008-09 seems to be developing. The frequent flight of capital into and out of developing markets shows that the foreign investors are not confident enough about the steady growth of these markets, and that as and when their own home markets can offer even temporary gains, they would rather avail of that.
The situation is similar to what emerged in the Asian Tiger economies in late nineties of last century. India had escaped some of the ravages of that melt down because we were relatively insulated. The conditions today are different. The real estate market has a much longer turn-around time for invested money to complete its productive cycle and cannot afford to face a sudden disappearance of cash flow for ongoing projects. It cannot also break the investment cycle by refraining from launching new projects after completion of earlier ones. Therefore it would be prudent to see the looming lull in the economy well ahead of its actual occurrence and plan projects accordingly. The problem in such trimming will be how to keep the men and machinery working productively. Ingenuity in doing this will distinguish the smart ones from the crowd of inept ones.
Regulatory Environment: It is important that consumer interests should be adequately protected from malpractices by unscrupulous builders. But it is also important to ensure that the regulatory framework is crystal clear on what is permissible and what is not. We are yet to see the real estate development regulating system in action. With a plethora of regulating authorities involved in clearing projects, a consumer has to go from pillar to post to find out at what stage a project stands, before he can opt to book a home or flat. It is high time a single window clearance system is introduced in the segment of the economy.
If there is one such single window, the potential buyer can access the web site of that authority and determine whether the concerned project has got clearance or not, and also obtain copies of the terms of the licence. The Industry must push for this reform at the earliest, so that an atmosphere of mutual trust can prevail between the builders and consumers. After the Canacona incident involving the ruby residency projects, buyers are naturally wary.
