The real estate business has been in news lately; the stocks are volatile, the prices are oscillating and the government's policies and announcements have been triggering concerned responses from industry players.

CNBC-TV18 spoke to three players related to the realty business in various capacities and tried to take stock of the current situation and the outlook ahead.

Rajeev Piramal, Executive Vice Chairman of Peninsula Land feels that commercial and residential real estates have been priced to optimum. He informed that they have 40 million square feet of land under development. Piramal sees his company’s cash flows secure for the next 2-3 years. 

Sanjay Dutt, Joint MD of Cushman & Wakefield observes that prices in Pune are still seeing appreciation. 

Rajiv Sabharwal, Senior General Manager of ICICI Bank informed that his Bank’s loan growth in value is 5% versus 20% (YoY), while unit sales have dropped by 20-25%. 

Excerpts from CNBC-TV18’s exclusive interview with Rajeev Piramal, Sanjay Dutt & Rajiv Sabharwal:

Q: We were speaking to some other land developer and they were saying that there was absolutely no cooling off prices in Northern India. But there are enough reports to suggest that prices have at least stagnated, if not started falling. What’s your own assessment for the Western region particularly Mumbai?

Piramal: I think the stagnation that you talked about is a reality. Me, myself personally have been saying this for few months that I feel prices have reached a level, where there is no upside anymore in the market. I think products whether residential or commercial - they are fully priced now and prices will remain stagnant for sometime. I don’t know but by correction, I do see the market not going up any more from where we are at current levels.

Q: Give us an idea of what’s fresh in everybody’s mind - the plot sale, the auction that was in BKC and does it reflects a temporary pause or do you also expect a cooling off of prices from current levels, post this stagnation?

Piramal: If you look at BKC, this is for the first time in a very long time that you had no interest for the BKC plot - there were no bids that came into the commercial plots. Even if you look at the residential plots that were sold and the prices at which they were sold were way above from what the second price was - so may be there was a little bit of recklessness over there in the biding.

But I think by and large what people are seeing is that they are getting into a wait-and-watch mode, people are getting into a holding pattern. Companies such as Peninsula Land who are developing for the last 2-3 years and can see cash flows pretty secure for the next 2-3 years from the existing projects; companies like us are in a positions to wait and see of how the markets pans out and to make a move once the realization comes in. We have a cash flow coming in and then we can get into the market.

So I think like us, there will be number of other companies who will get into this wait and watch mode and I think that you will be able to pick and choose - there may be some bargains out there in the markets. I think everything is going to happen slowly, I don’t think anything will happen overnight in terms of prices correcting.  Like I said earlier prices will remain stagnant. People are going to wait and watch and see how things turn out because when you have so much choppiness in the stock market, one of the key indicators when you look at real estate prices, is where is the stock market going and usually you see that increase in real estate prices and the stock market going up - they are linked. Given the uncertainty in the market and given the fact that sentiment does seem to have changed to some extent, I think people would wait and watch and see what’s going to happen over the next few months before making any moves now.

Q: What about rentals - lot has been spoken about commercial rentals at this point of time, do you see is that a case for them to come off by a bid going ahead in 2008?

Piramal: I don’t think so because if you look at Mumbai in particular, its a unique market to the extent that there is not that much supply. We still have a demand-supply gap over here. So given this gap, I still don’t see prices going up and the fact is that and it speaks a lot about where the markets is right now, even though supply today may not be meeting all the demand - I don’t see prices continue to run up as they have been. I think cooling off of prices or correction of prices; I would hesitate to say that yes, it is definitely going to happen. I don't see upside in the markets in terms of prices and we are fully priced in terms of where the products are selling today.

Q: Give us a quick word on the kind of sentiment shift that we have seen and you have been talking about and the other costs that are going up for developers like yourself. Give us an idea of what kind of growth rate you would expect companies to be able to manage?

Piramal: I think your growth rate would depend from company to company and depends on the kind of land bank that you have. But for a company like us, we have over 40 million square feet of development four million in Mumbai alone, of which we have sold huge amount. I think for us, in terms of next 24-36 months because we have pre-sold and we have all these commitments in place, I don’t see any dramatic difference. The difference is going to be in terms of how many land transactions you see and at what price these land transactions have been and the rate of these transactions and that’s where the slowdown have to happen first and that is what is going to happen initially in the market.

Q: We spoke to a couple of developers who say that prices are not coming off all that much? You being one of the largest lenders in the housing market have you sensed a significant slow down and the kind of lending people are taking from banks such as yours both in terms for absolute units as well as for individual loans?

Sabharwal: How we perform is a function of how the sales are there in the market. Are developers able to sell their units with the same pace as they were selling in the past? What we have seen in the past year or so is that there has been a slow down in terms of unit sales. On an average, the unit sales would be down anywhere between 20-25%, though these figures would vary from project to project and from city to city.

Q: What about absolute loans that you have dispersed on year-on-year basis - what you have seen over the last 3-6 months; how would that compare with the year?

Sabharwal: If you talk about value factors-in some of amount of increases in prices which would have happened in certain cities like Mumbai in the past for one year also, it also factors in the resale which happens in the market in terms of units which are already made and they are sold form one entity to the other - if I look at the value then the market would either be flat or would be growing at about 5%. So there has been a clear slowdown in the financing market also.

Q: 5% compared to what?

Sabharwal: Last year was a slowdown compared to previous years. If I look back two years plus, then market was growing at 30% plus, last year the market grew by about 20% and this year would be lower than that.

Q: We have been getting all sorts of reports, ICICI Bank saying unit sales have come down, couple of developers said that prices are relatively holding at this point in time - what is your assessment of value in this industry as a whole right now and how has it changed over the last three months?

Dutt: It is a given that the prices have actually slowed down, the markets are stagnating. But if we were to elaborate on the buyer segment, if we were to distinguish between end users and investors, I may agree with Rajiv that the overall slowdown is 20-25%. But when it comes to investors which are a speculative component of the markets, the fall has been significant. We assume it must be over 40-50% and that is where the impact is being felt by the developers, overall.

Over the last three months it's the erosion of confidence which has led to the psyche of the developers and they are now being more cautious in approaching new developments.

Q: Give us an idea of what are the zones - either geographically it is National capital region (NCR), Tier II cities where you are seeing a substantial amount of downtick, is there a Bangalore which is unwinding more rapidly than Chennai? Is it possible to give assessment in that aspect?

Dutt: India presents a combination of unique markets; if you were to divide between Tier I and Tier II, Tier III cities, then clearly Tier I cities have maximum economic activity and the demand side has not really gone down, except for the investors who have gone down.

So for example, Bangalore, 150,000 units out in the market available and the prices have been under pressure, prices have not gone up substantially but if you were to look at Mumbai for example, where the prices now seem to be coming down, in fact in some cases had gone up 100% in the last 12 months especially in the suburban market clearly presents a total different picture. While in NCR and Chennai, the markets are totally different - you will see a stagnation in Delhi, and Gurgaon and some pockets of Manesar, greater Noida sliding down a bit. If you go further in Tier II cities, the prices have cooled down a bit. Overall the impression is that prices have peaked.

Likewise if one looks at Chennai and Pune for example, they present different markets. What we have discovered and we came out with the assessment some time back that there are some emerging corridors in well-established cities and there are some emerging cities which are being viewed as future potential of economic activity and that is where the corporates investors and developers have parked their capital. We expect those are the pockets where the appreciation is still being registered. A good example would be Hingewadi, Wakad and Chakan in Pune, likewise Sriperumbudur; which earlier where the markets in Chennai for eg where heavily focused on OMR (The Old Mahabalipuram Road)  which now seems to be drifting towards West.
Overall I feel the prices in the market where they have peaked customers have taken a cautious approach and are stepping back a bit and are not committing as they were in the past and there is a wait and watch overall situation.