Kashmir’s Real Estate Slump

  • Mukeet Akmali
  • Publish Date: Aug 5 2018 10:47PM
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  • Updated Date: Aug 5 2018 10:47PM
Kashmir’s Real Estate Slump

Land and property dealers find no takers as common man’s buying power has taken a drastic hit, reports Mukeet Akmali

 

Aziz Ahmad Zargar bought a 24 marla plot for investment purpose at Ahmed Nagar in district Ganderbal for Rs 64 lakh in 2013. Five years later, he is selling it at Rs 84 lakh but still is not able to find any buyers for the last one and a half year. The problem with the plot is not any locational disadvantage or any dispute, but the dwindling fortunes of real estate sector in Kashmir. Once a thriving sector with huge returns, Kashmir’s real estate sector is passing through worst ever slump with sales of land, residential, commercial properties plummeting drastically from last 5 years pushing many stakeholders to switch line of activity.

“It is difficult to find buyers for property. Whoever is showing interest wants me to divide the plot into two or three plots which will result in loss for me,” Zargar said.

Zargar is not the only one facing the dilemma. Javid Ahmad Rather who retired from government job last month has lifetime saving of Rs 35 lakh. He wants to purchase a house, but can’t find one.

In the last three decades, real estate sector was among prime movers of state’s economy. However, according to real estate dealers sales in the sector have gone down by over 70 percent, which has also impacted its allied construction sector with cement manufacturing companies too decrying dip in their sales.

According to real estate consultancy firm Knight Frank, home purchases in India fell to a seven-year low in 2017 despite sliding prices. A new tax regime and a regulation introduced last year have pummelled a sector already reeling under the aftermath of demonetisation in late 2016.

The Kashmir Ink in order to find out reasons spoke to stakeholders in real estate sector who attributed dwindling fortunes of this sector to rising land prices and worsening economic scenario in Kashmir.

“Buying power of people in Kashmir has been badly affected due to various reasons. First the prices have escalated, second our economy is not doing well,” said Abid Hussain Kanth, Managing Director, Sheikh Ul Alam Housing Colony.

“Whatever people have saved, they don’t want to invest in the real estate sector this time as they believe it has outlived its prime and other fact is volatile situation in Kashmir,” he said adding that real estate dealers are finding it difficult to find buyers for their properties as a result of which several dealers have shifted to other businesses.

Proprietor of Firdous Housing Colony, Sheikh Ghulam Qadir, also believes that prices of land have skyrocketed in Kashmir. “As per my estimates, an average employee at the time of retirement has saving of Rs 30 to 40 lakh in which he could not buy even 10 marlas of land because on an average in city localities land prices have gone above Rs 1 crore. This is one of the major factors hurting our sector. Second is the economy of the state is not doing well since floods of 2014, which means the businessmen, traders are too not having buyer power due to fallout of floods, GST and demonetization impact.”

“In last two years, price of real estate has not increased as it is pure economics between demand and supply. When there is no buyer prices won’t go up,” he added.

Former president of Federation Chamber of Commerce and Industries, Shakeel Qalander, said that slump in real estate sector is a fallout of overall worsening economic scenario in the state. “We have to realize that our properties are priced as per the rates in vogue in metropolitan cities but our business and economy is not even 20 percent of the economy of metro cities. If you compare income of average businessmen in Delhi it is much higher than earnings of big shots in Kashmir, this is the real situation. During 1990s, when armed conflict was on peak, there was hardly any business and people invested in real estate resulting in construction boom. But it will not continue forever. People don’t have money to buy a plot of land for Rs 1 or 2 crore. They now prefer to invest in some other sector rather than this.”

“Another thing is that in other parts of the country real estate business has been hit but what they did there that they slashed prices of properties, which has not happened in Kashmir,” he said.

Qalander further added that due to prevailing situation, GST implementation the economy is not in good shape. “People fear to invest as they don’t know whether they would get returns they desire from investing in real estate now.”

This slump in real estate has badly impacted cement manufacturing units too, who complain that their sales have gone down by over 40 percent.

Executive Director TCI Cements Wasim Tramboo says that the sales of cement are down by 40 percent since 2016. “It simply implies that construction sector is not doing well in Kashmir in last few years. People are shying away from spending money due to fact that economy is not in good condition. They prefer to hoard money rather than spent it given the uncertainty in Kashmir.”

Slump in real estate sector is not only felt in Kashmir, even plummeting prices haven’t been able to entice home-buyers in other states.

At the end of 2017, India’s residential sector appears to have shrunk to a fraction of the size it was less than a decade ago.

New project launches fell 41% and sales of new homes fell 7% in 2017. There are still hundreds of thousands of unsold properties, and it may take nearly two years to sell off just those, a report says.

India’s real estate market never fully recovered from the 2008 financial crisis. And since 2010, it has remained depressed with new launches falling by 78%.

The banning of two high-value currency notes in November 2016 came as a body blow as the sector is known to deal with a lot of cash. And before the developers could catch their breath, the government, in May 2017, introduced a regulator and a new set of rules to make transactions more transparent. Finally, the knock-out blow came in the form of the goods and services tax in July 2017. Developers could not pass on the higher tax burden amidst sliding demand.

 

(The pictures are only representational and do not necessarily relate to the story)