Lately
real estate projects in Patna, both commercial and
residential are getting delayed.
General causes for delay in projects in the real estate
Patna market varies from funding issues to delay in regulatory
approvals and weakening demand. Lack of funds due to slowing investor activity
is another reason for delay in residential and commercial projects in
Patna. But the most significant reason remains lack of demand.
The main reasons for lack of demand are recessionary and inflationary
pressures.
A major reason for delayed projects in
Patna is believed to be entry of new players in real estate
arena. Many experts think that opportunists, who joined real estate business in
Patna when the market was buoyant, are suffering the most. Many developers
in
Patna, who started their projects when realty market in
Patna was booming, lost their way once recession struck. As
these new entrants lacked resources to build large size projects, they started
failing to maintain their cash flows once recession struck. Because of lack of
credentials, the bankers also didn’t extend funding to them. Now most of these
new realtors in
Patna are either trying to sell their projects to reputed
developers or manage funds instead of completing their projects in
Patna. Thus their projects are getting delayed in
Patna.
But many projects of reputed developers in Patna are also getting delayed due to decrease in inflow of
Foreign direct investment ( FDI) after 2009. After 2005, when government
allowed FDI in realty sector, FDI inflow in realty sector in Patna increased steeply. In 2003-04, share of realty sector in
total FDI inflow was 4.5% which increased to 10.6% in 2004-05 and 16% in
2005-06. But after recession crept in 2009, fall in FDI inflow was observed.
This downward trend is continuing till date. This fall in FDI inflow has
contributed to delays in completion of large number of projects in Patna.
Another small but
significant reason effecting funding is increase of minimum investment limit in
private equity funds (PE) to Rs.1 crore, by Securities and Exchange Board of
India (Sebi). Many small investors are finding it difficult to raise such a
hefty amount. This is adversely effecting investment through PE funds.
Apart from funding
issues and issues related to slackening demand, increase in input costs is yet
another contributing factor in delay of projects in
Patna. Increasing input costs have decreased the margins of
developers in
Patna drastically. This is affecting the profitability of many
ongoing and yet to be started projects, which are getting delayed in
Patna.
Rising land cost
in Patna is another major reasons
of delay in launch of new projects.
So, it can be concluded that delay in projects in
Patna is an offshoot of problems like funding, weakening of
demand and increase in input costs and rising land cost. These issues can be
addressed only by regaining investor confidence, increasing fund inflow and
inducing demand in
Patna real estate market.
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