Unsold apartments amounted to blocking of capital
The issue of unsold inventories has been much discussed in the key residential real estate markets and the volume of such inventories is on a rise in the Metropolitan cities.
In a recent review meeting of Public sector banks, the prime focus was the issue of unsold apartments in the metropolitan area, and allocation of fund meant for one project to be used to kick-start other projects, a normal practice by home developers these days. The meeting was presided over by D.K. Mittal, Secretary (Department of Financial Services), Ministry of Finance. The meeting was called up on in the light of increasing number of reports on the existence of large number of unsold flats with developers or builders in cities such as Mumbai.
The Finance Minister P. Chidambaram expressed deep concern over this scenario and opined that when there is sufficient demand for dwellings in the cities, the presence of unsold apartments amounted to blocking of capital. According to him these apartments should be a matter of concern for bankers who have funded the builders and developers, on the one hand, and property buyers, on the other.
Experts believe the prime reason for the piling up of inventory is because of the refusal of builders or developers to reduce prices. If they bring down prices by 15-20 per cent, the inventory will be sold out. The sale of these housing units could provide a relief to the on going financial crunch in the Real Estate.
The meeting concluded with formation of a committee under the leadership of Ajai Kumar, Chairman and M. D., Corporation Bank, to look into the issue of unsold flats with builders holistically. The committee will also examine ways to put pressure on builders to bring down prices and popularize housing loan schemes through incentives.