Mangalore , March 16, 2013;
By C D Souza
Is Mangalore going through a real estate boom or is it going through a slump? Or is it that Mangalore market is so unique that it is immune to the general trends witnessed in this sector elsewhere? These are the commonly asked questions about the real estate scenario in this coastal region. But there is no satisfactory answer because nobody knows for sure what the situation is like in the coming months. When real estate sector in big cities like Bangalore is on the downslide the impact could not be felt in Mangalore. On the contrary, undivided Dakshina Kannada has been witnessing a flurry of activities in this field. Every day at least three to four projects are being launched giving an impression that the real estate sector is going through a boom. Big national players in real estate Godrej, Raheja, Purvankara, Brigade, Prestige groups etc., have announced projects in Mangalore, adding credence to the prevailing belief that Mangalore is going through a real estate boom.
Prima facie it may look everything is rosy but going through a little deeper one can see that the situation is definitely not as rosy as it is being projected. Even established builders and promoters with over 25 years of experience in the field are unable to say with conviction that the real estate market is healthy. P M A Razak, President of Mangalore Chapter of CREDAI says, in Mangalore 80% of the property is bought by NRI’s who think it is a wise investment. Even people from South Kanara who are in Mumbai buy property here. Being an educational and healthcare hub there is a steady demand for apartments in Mangalore. In the same breath he cautions that the real estate market is going through a rough weather as there has been decrease in real estate transactions in the city in the last one year or so.
Steady Market
“At the moment Mangalore is going through a stage where there is neither boom nor slump. But every day a few new projects are launched which means in the next two or three years there will be about 15,000 flats for sale in Mangalore. If the current trend of launching new projects continues there will be surplus supply and that is the real danger facing the real estate sector. As on today things are certainly not looking bright”, Razak declares. Razak says the time is now ripe for the market to carry out corrections and stabilize so that it can avert a bubble-burst kind of situation, which is detrimental to the entire industry and the economy.
On the other hand architect and developer Sanath Shetty who has launched the tallest skyscraper of Mangalore “SKS Planet” paints quite a contrasting picture. He says the devaluation of the rupee has given a fillip for demand among NRI’s to buy property in Mangalore and surrounding areas. “For NRI’s buying a property here is the best investment vis-à-vis other investment options available to them. They may or may not opt to come and settle here immediately but nevertheless buy property for their parents or with an option to come back and settle here in future. It is a wise decision for NRI’s to buy property because at the moment prices are realistic in Dakshina Kannada unlike in Mumbai or Banglaore, where they are unrealistic”, he reasons. Sanath also points out that Mangalore being a tier II city more and more people want to come and settle here. He points out that cities like Mumbai and Bangalore have reached saturation levels and are choking and people naturally look for tier II cities like Mangalore to settle and they invest in property. According to my assessment there is neither a boom nor downslide and market will sustain this realistic stage. When big players like Godrej, Raheja and others come to Mangalore they do so only after doing their homework. It shows the market is quite stable, he argues.
No doubt there is a sizeable chunk of people from these coastal districts working in the gulf and these NRIs have been investing in multiple apartments as an investment option because of the high returns as compared to other forms of investments. But in the last few months there has been a dip even in the bookings even by NRI’s, which is creating panic among builders and promoters.
New players creating havoc
Siraj Ahmed of In-Land Infrastructure Development who has been in this trade for the 25 years, terms the present scenario as a kind of gimmick. He points out that to say real estate is booming in Mangalore is absurd because there has been hardly any enhanced economic activity or big project to give a boost to the real estate in this region. He argues: “Contrary to the rumours of attracting more people, youngsters of this area are leaving the place in search of greener pastures. Other people are actually leaving Mangalore due to the communally charged atmosphere of the region. Youngsters or people working in the IT field cannot go on an outing because of the fear of moral police. NRI investors are already absorbed by professional builders. There is hardly anything to say the economic activity in this area is getting any fillip. Banks have raised the rate of interest on housing loans deterring people to go for housing loans. Real estate industry cannot prosper under such dismal conditions”.
Siraj Ahmed blames the present scenario to the new players in the field, who he says, are offering exorbitant price for land owners and thus create unnecessary competitions. “There are new promoters who appear on the scene offering a higher price for a property under negotiation than what is available in the market and usurp the land. Established realtors, who have gained a strong foothold don’t resort to such gimmicks. The new developers who are over enthusiastic offer exorbitant and unrealistic prices for land owners and it is impossible even to think how they will be able to survive by offering apartments at prevailing market rates especially when construction costs are on the increase. It is quite disturbing because as on today the demand supply ratio if 1: 2 and at the speed at which new projects are being launched, the ratio may go up to 1: 4 or even 1: 6 in the days to come as about 1500 apartments are now getting ready in the city. It will be difficult for builders to withstand this stage for long and only the fittest will survive this stage”, Siraj cautions.
Caution for buyers
As a word of advice Siraj says that investors should be cautious while investing and they should take into consideration the antecedents of the developer/promoter, the projects they have completed so far and whether they will be able to complete the project they have undertaken within the stipulated time or not. Citing the example of an advertisement in a daily Siraj says “this builder says in his advertisement all his flats are fully booked and sold and yet he says he is offering a special price including a modular kitchen free of cost. If his flats are fully sold there is no need for him to say at the bottom about the freebies he offers. How can that builder sell apartments at the prevailing rates and also survive after offering such concessions, is a question that calls for an answer”.
Siraj also agree that big builders and MNC’s have come to Mangalore but it is also to be noted that some of them have taken long time to complete their projects and others are offering concessions, which means that the situation is not quite bright.
At the moment in Mangalore the prizes are hovering around 3000 sqft to 5,500 sqft within the city and from 2700 to 400 sqft in the outskirts. Within the city limits a 1000 sq ft house may cost anything upwards 40 lakhs and luxury apartments go beyond 50 lakhs. This is beyond the reach of the middle class and salaried class people who are often forced to scout for a home in the outskirts.
At the moment it is clear that the market is saturated and the drop in bookings is like an alarm bell cautioning what future holds. Most NRI’s who have invested in apartments will not worry about the drop in prices and will wait for the prices to go up to sell so that they get due returns for their investment. Siraj says “it is like a bubble floating on the water which may explode any time unless corrective measures are taken on a war footing”.
Despite the real estate sector going through a rough weather builders are putting up brave front expecting miracles so that the market may pick up. At the moment, no one can actually predict what is going to happen in the coming days. Indeed only a miracle can save the real estate sector from sliding further. The general public can just keep their fingers crossed.
