As the economy continues to weaken,the real estate market too has started showing signs of weakness,in line with other asset classes. Residential real estate prices across the country have started to soften,falling between 1 and 5 per cent across 22 cities out of the 26 that is tracked by the NHB Residex. Anshuman Magazine,chairman and managing director,South Asia,CB Richard Ellis,a global real estate consulting firm,told Sandeep Singh that the markets would continue to remain weak for a while and developers would have to put up with some pain too. Investors,however,will need to take informed decisions and keep their expectations realistic. Excerpts:The NHB Residex showed a fall in residential real estate prices across the country in the last quarter. How do you see the trend going forward?While there is pain in 2013,2014 may pose a bigger challenge for the real estate market. It is very difficult to forecast anything in India as the real estate market does not follow a logic. It will happen when the market matures,and then we will see longer periods of lull. Currently,the pace of sales has gone down and they are going to remain slow with the slowdown in the economy. The only positive is that while sales are down,they are still happening. The problems with the current phase are: high uncertainty (both economic and political),liquidity problem,high mortgage rates and sentiments are subdued.In what way is rupee depreciation impacting the real estate market?There was an expectation that with depreciation of the rupee,NRIs will rush in,but on the contrary it has become worse and people sitting outside are thinking that with rupee depreciation the property they are going to buy is 20 per cent cheaper,but since there is no stability in the rupee,it can go down to any levels and they will lose out. Even the private equity (PE) money has dried. A new investor would not come in till the rupee stabilises. PE investors who invested 3-4 years ago are sitting on either flat or negative positions. They are looking to cut down their losses and exit,and in several cases where they got options,they have made an exit.While there is a slowdown in the market,how is it impacting developers? Will some developers have to close down in times like these?Maybe some smaller developers may get impacted but historically that has never happened. It is only when the economy and markets mature,that in times of stress there is consolidation. Developers with a not-so-good record are already facing a decline in their sales as consumers are going only with those with better reputation and where they feel that even if there is some delay,the developer will finally deliver. If there is a developer with a decent reputation,decent location and the price point is right,they are getting sales. However,in markets like ours,a lot of small developers get away as several areas become unaffordable and people have to go to smaller developers as they do not have a choice.What are developers who neither have the financial strength nor sales to support their projects doing to sustain?There are several such cases and there the smaller developer who has control over land is going to a big developer who has brand equity and the financial strength to develop it. That is happening in Gurgaon,Noida,Pune and across the country. The reason is that a lot of developers are sitting on quite a bit of land and they had projections that sales would continue and they would be able to develop them,but with sales not happening,the cash flow and liquidity has gone down and since you don’t have the ability to develop,you team up with another developer.Will Indian real estate see a situation like that in the US,where property prices crash when the economy goes down?It will take some time and the biggest reason is lack of infrastructure. While land is abundant in our country,there is a lack of developable land,and it is the slow implementation of infrastructure development has actually led to prices remaining high. Also in India,people hold on to their property because here they have huge confidence in real estate as an asset class that it will grow and that holding leads to price appreciation. In America,the prices don’t go like crazy because there is abundant supply of developable land with roads,power,water,parking etc. While it will not happen in the near future,we are getting to that point where prices crash or markets remain subdued for longer periods. As our economy matures,infrastructure improves and developable land increases we will see crash in prices — it may happen in 10 years.Do you see a supply bubble emerging in the market?There is a situation like that in different pockets. On paper,there is oversupply,but all of it may not come up. In places like Noida Expressway,Yamuna Expressway no doubt there is huge supply but the advantage they have is the price point as many cannot afford Delhi or Gurgaon. What this large supply will do is that it won’t allow prices to increase and it would be end-user driven.If that is the case,how does the situation look like for prospective investors?This is a market where you need to take an informed decision: who is the developer,what are the economics of the area,what is the price point,why would the prices go up,is infrastructure coming up and is the quality good. Also think of the longer term and enter with a minimum time horizon of 3-5 years. Now investors will have to be more realistic on the expectation of returns from property. You will not get unrealistic returns. So it is worth investing even today,but take an informed decision.How about big ticket deals in the housing market? Are enquiries rising with softening prices?Enquiries are not going up definitely. As the sentiment is low and there is uncertainty,the overall enquiries have gone down. The fact is that at the peak of the market you get 100 enquiries but when it is down,it shrinks to 10-20 or so. They have come down significantly.The RBI has restricted banks and housing finance companies to fund under the 80:20 scheme of developers. How is it going to impact the market?It is another dampener to the real estate market but I don’t think that it will have a significant impact. Even though the scheme had become prevalent,it was not very common.