PRICE, INTEREST RATE CUT WILL NOT REVIVE PROPERTY MARKET

JOB INSECURITY IS THE BIGGEST THREAT TO HOUSING MARKET

Six months ago, developers would easily blame high interest rates for the slowdown in property market and hoped that once rates come down, buying will resume at a pace witnessed till 2007. It is this belief that never forced them to think of price cuts to lure buyers. But now forced by a lull in the market, developers are increasingly cutting prices with little impact on buying.

Price cuts will soon spread to more developers and projects, but it's highly unlikely that buyers will come back. Earlier there were end-users, investors and speculators all engaged in a buying frenzy. Now there are none. With everyone expecting prices to fall further, it's impossible to imagine that investors or specualtors will come back in a hurry. But the biggest cause of concern for property firms is the disappearance of end-users.
Theories like India had huge housing shortage and all Indians wanted to own a home and so demand for housing is never going to fade away have completely lost strength. Some developers are still seen mouthing these arguments. But as they do so, it is increasingly clear that they are fooling themselves and investors in those firms must quickly dump their stock.
Job losses or the fear of it is the single most important factor for the property market. Media reports suggest scores of companies have already cut jobs in thousands. Job cuts could be much larger as it is neither possible nor interesting for publishers to report all job losses. In a scenario, where one is losing job or someone sitting next to you in your office has lost job, it's impossible to think of making a huge investment in homes. When workplace gossips is centred only on job cuts and salary cuts, it's impossible that employees can dream of owning a home and take on a huge debt burden.
Meanwhile, expectation that home prices are likely to fall further will surely keep out even the cash-rich and needy. Also, reports of best of developers keeping to their reputation of not delivering on their promises, and reports of some of them likely to go bankrupt, will surely keep any wise home buyer from giving away his hard-earned or not-so-hard-earned money to builders.
In all it's the uncertainty that is ruling the market: uncertainty of one's own future for a home buyer; uncertainty of builders keeping their promise; uncertainty of a home ever getting delivered; uncertainty on prices, uncertainty on home loan rate; and uncertainty of builders' survival. Amid all this, you don't require courage but foolishness to take the plunge.