DLF defers projects as demand falls
19 Nov 2008
The Indian realty sector, which was riding an unprecendented boom for the last three years, is now seems to be bracing for tough times ahead. India's largest real estate developer DLF has deferred some projects. According to chairman K P Singh, the company has also laid off a number of employees and, if the situation does not improve, there may be more job losses.
Singh was speaking on the sidelines of the India Economic Summit organised by the World Economic Forum.
While the realty sector has been facing a tough liquidity situation during the last year, Singh said liqudity was not a problem for DLF; the measures have had to be taken in view of the falling demand, which has gone down substantially.
DLF had earlier deferred its hotel projects on account of non-availability of finances. The company has also put off construction of malls, including the country's largest mall, The Mall of India, in its effort to conserve cash.
According to Singh, the real estate sector would have to shed jobs on a massive scale unless urgent steps are initiated to boost sagging demand. This could be done by reducing the rate of interest on home loans to arround 7 per cent.
Singh identified the home loan rate for the fall in demand. He said that home loan applications with banks have dropped and soon there would be no takers for home loans though banks would be willing to lend.
Singh's remarks come at a time when there are reports of several major realty players retrenching employees to cut costs. Unitech and Parsvanath have also reportedly cut staff recently. Though Singh did not specify the number of job losses at DLF, reports put the number to around 300.
The slowdown in residential property sector started earlier this year with the steep rise in prices and interest rates putting homes well beyond the reach of many buyers. The high-end sector witnessed a steep scaling down of prices by developers. In this sector, demand was lowest and as prospects of appreciation dimmed, many investors and buyers opted out of the market. However, there has been no corrections in the mid-income projects or houses below Rs50 lakh in metros.