My uncle works for one of the real estate companies in Chennai. The company has a strong political connection and so Public Sector Banks were the primary source of funding for this company.
As sales slowly started drying up , the company borrowed a second round to pay interest for the loan initially taken. (You should not ask how these loans were taken:-) )
While this situation continued, interest rates rose and sales almost came close to zero.In normal circumstance you would have expected the builder to reduce prices. Now they have gone in for another round of financing from a private financier with double the amount of property as collateral.
Just imagine the margin of this builder, if they are able to pay "Sooooo muchhh" interest and still sell their properties for a profit.
"Property prices keep going up " is the mantra that is held to sell property to the middle class. So, these companies don't want to bring down the prices at any cost.
Moral 1:- Builders will never want the price to come down.
One of my friends had bought a flat from this company 3 years ago for 75 Lakhs. He wanted to dispose this of for 92 Lakhs. But after trying out for 6 months, he has come down to an asking value of 80 Lakhs ( of course a big loss- considering the interest paid). Still no takers.
The builder is still maintaining the prices of unsold flats in the apartment to market value. My friend is not able to sell his flat , the builder has many unsold flats. But my friend has not been able to hold to his selling price for long.
Moral 2:- Selling real estate may not be that easy for an individual as you may imagine.( Brokers, Builder, Bankers manage the game)
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