Are you worried about picking up the right real estate property? Understand the true dynamics of the prevailing situation in the Indian real estate market first. Otherwise, you will end up making a wrong decision. The economy and its performance have a lot to do with the overall customer demand for both commercial and residential properties. Overall demand for properties in a particular city has more to do with the location than anything else and this also pertains to factors like infrastructure. The real estate has phases of both depression and growth and currently, supply is more than demand, a very rare case in this industry.
 |
| Indian Real Estate |
Market depression is primarily responsible for the difficulties faced by developers in selling homes. According to Pankaj Kapoor, the MD of Mumbai based Liases Foras, a real estate analytics firm, the housing sector is facing a situation on the throes of typical recession. According to the firm, the NCR-Delhi region saw sales of just 1.24% of inventory in the June quarter of 2013 while the monthly sales velocity should ideally be at least 2.75%! The Mumbai Metropolitan Region saw sales velocity figures of just 1.12% while the numbers were 1.53% and 2.27% for Chennai and Bangalore respectively. Pune’s market had a figure of only 1.61% while Hyderabad had only 1.34% of sold inventory.
According to co-founder Kartik Varma at PropTiger, a property brokerage, the market is witnessing a definite slowdown and lowering of business volumes. Transactions are going down by the day and unaffordability counts as the major reason for the same in cities like Mumbai and Delhi and not the shortage of willing buyers. Kolkata and Chennai are typically conservative real estate markets and supply overhang is not as pronounced as say markets in Pune, Mumbai, Delhi-NCR and particular areas in Bangalore. There are buyers for homes that are priced quite reasonably and are habitable. However, affordable housing is only available in locations that are far from the heart of major cities and this is a major reason for the slump.
Developers are still launching newer projects in spite of a drop in overall customer demand. However, in what is a first, many of these new projects are a quest to align reasonable prices with decent amenities. Alongside, middle income housing and affordable housing is sectors that are now drawing more developers owing to the immense demand in only these two areas. About 85% of all launches in the prominent eight Indian cities revolved around these two segments and most buyers in India are currently looking for properties priced between INR 40 to INR 80 lakhs. There is a huge demand for properties priced between INR 20 lakhs and INR 40 lakhs from end users mostly. Government support with a subversion of 1% interest for loans till INR 15 lakhs along other tax deductions mainly fuel this demand.
Suburbs and other areas on the fringes of major cities are witnessing a real estate boom with affordable housing projects aplenty. Buyers are looking at snapping up properties in remote locations which have good infrastructure and decent connectivity options. However, local builders mainly dominate this segment and companies stay away owing to low margins of overall profits with these projects. At the other end of the spectrum, high end premium projects are also being launched in top Indian cities which are situated close to business and commercial hubs. Yet, this segment has also seen a slump in sales as more and more buyers adopt a cautious approach towards investing and decide to wait for better deals courtesy impending price revisions.
Ideally, real estate markets in all cities should see corrections in prices owing to unsold inventory and diminishing sales and this is happening in some areas but by and large, real estate prices are either going up or are static. Mid segment prices have gone up last year and returns for investors have been decent too. Surprisingly, real estate investment returns have been very good and have gone up to the tune of almost 30% in some markets with an average of 20% prevailing across almost all cities which is more than returns from stock markets or even gold according to Frank Knight India studies. Prices should be static over the next few months of 2014 according to experts and analyst. Small price revisions will happen thereafter but nothing in a big way.
However, some experts beg to differ and state that price corrections of about 10-15% should be in place over the next couple of years. Alongside, time corrections could also take place and this is substantiated by the fact that properties in secondary markets are being sold at prices which are less by 10-20% than what is charged by builders. One thing is for sure: there should be no sudden price increases in the near future. Alongside, the sector will also be under a lot of pressure owing to newer rules and regulations. There should be a new law in place soon which will make life very difficult for real estate developers.
According to financial advisors, if you are thinking of buying a house, you should do it immediately as you will save on income tax and house rent. Alongside, the market will never be quite perfect for purchasing a home. Property prices will not be rising largely anytime soon but they might just rise a little after the elections. Thus, it makes sense to go for a property now with some additional discounts thrown in from the builder’s side. Flexible payment options are now available and this makes it a good time to snap up your desired property. The resale market is still going strong and many properties are selling at cheaper prices than those originally desired by developers. If you are looking to sell your home, you might do well to wait till the election results. However, buyers should not waste time as the market will never be as perfect as they want it to be!
No comments:
Post a Comment