17 February,2011 06:45 AM IST | | Varun Singh
Industry experts say LIC housing scam and builders' alleged involvement in other ones has severely dented investor and buyer interest and faith in the sector
THE LIC housing loan scam and the suspected involvement of builders in scams like the 2G spectrum one has severely dented investor interest and faith in the sector, say industry experts.
There's more bad news, they hasten to add, saying that the realty slump is not going anywhere anytime soon.
"Sales have seen a slump after the LIC housing loan scam and banks are not funding projects like they used to.
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Builders are facing a major liquidity crunch and even ongoing projects are unable to generate funds," said Anand Gupta, treasurer, Builders' Association of India.
Pointing out that, in real estate, reputation and sentiment prevailing in the market matter most, he said, "The credibility of the real estate industry has suffered severely because of a few builders being dragged into controversies.
Though judgment has not yet been passed in their case, the reputation of the entire real estate market has been maligned and this is affecting everything," said Gupta.
Pankaj Kapoor, managing director of Liases Foras, a real estate rating firm, said, "The market had not been doing well in the last few years as it is and these scams have only made things worse.
Today, not many investors want to venture into the market because they are not sure of making a profit.
"The cost of construction is way too high and sales are down. The LIC housing scam has dented the confidence of banks and investors and it is becoming increasingly difficult for builders to raise capital.
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Even retail investors are shying away from buying flats because they do not know if they will be able to get a higher price for them later," he said.
While Gupta expects the market to remain this way for the next two to three months, others expect the trend to continue at least for the entire year.
Share connection
Ajay Chaturvedi, CEO, Accommodation Times, said that real estate and share markets are directly connected. Whenever the share market goes up or down, the real estate market follows suit.
"Money comes in from the share market and, when it fares well, it is invested into the real estate market.
With the share market being affected because of the scams, investors don't have money to invest in real estate. This is bringing about a liquidity crunch in the real estate market," he said.
Sales have seen a downward slump after the LIC housing loan scam and banks are not funding projects like they used to. Builders are facing a major liquidity crunch and even ongoing projects are unable to generate fundsu00a0-- Anand Gupta, treasurer, Builders' Association of India
