Mumbai: With developers shelling out record-setting amounts for prime real estate across the country, the year 2006 saw property prices shooting through the roof.
But are they having second thoughts about the high bids? Major players in the property market are finally admitting that in a race to build a land bank, they may have gone overboard.
"Everyone is chasing land and doing transactions just to build a land bank and a lot of people are bidding irrationally. The auctions are way out of hand, specifically in North India and the Bombay Mills also," says MD of Unitech Limited, Sanjay Chandra.
He adds, "This is mainly because they want to create land banks to get their NAVs (Net Asset Value) and MPVs (Market Potential Value) up and raise capital. So, there is a lot of irrationality on that front."
With land being bought at unprecedented prices, developers say their profit margins are taking a hit.
"Land prices have gone ahead faster than residential prices. To put things in perspective, say in Thane you buy land today; compared to flat cost prices, the replacement cost, we are working at a 15- 20 per cent loss," says MD of K Raheja Universal, Ashish Raheja.
"So, we have to price my flat 20 per cent higher, just to break even. Land is being bought with a two-year future punt and that is very bad," he adds.
Analysts say developers have been using money made from pre-sales of their property to buy land at mind-boggling rates.
With the flood of money being raised through listings and private equity, it may be a while before buying your dream house doesn't burn a big hole in your pocket.
source : IBN
But are they having second thoughts about the high bids? Major players in the property market are finally admitting that in a race to build a land bank, they may have gone overboard.
"Everyone is chasing land and doing transactions just to build a land bank and a lot of people are bidding irrationally. The auctions are way out of hand, specifically in North India and the Bombay Mills also," says MD of Unitech Limited, Sanjay Chandra.
He adds, "This is mainly because they want to create land banks to get their NAVs (Net Asset Value) and MPVs (Market Potential Value) up and raise capital. So, there is a lot of irrationality on that front."
With land being bought at unprecedented prices, developers say their profit margins are taking a hit.
"Land prices have gone ahead faster than residential prices. To put things in perspective, say in Thane you buy land today; compared to flat cost prices, the replacement cost, we are working at a 15- 20 per cent loss," says MD of K Raheja Universal, Ashish Raheja.
"So, we have to price my flat 20 per cent higher, just to break even. Land is being bought with a two-year future punt and that is very bad," he adds.
Analysts say developers have been using money made from pre-sales of their property to buy land at mind-boggling rates.
With the flood of money being raised through listings and private equity, it may be a while before buying your dream house doesn't burn a big hole in your pocket.
source : IBN