Buying a property? Pick one before elections are over
Apr 11, 2014
Source : The Economic Times

 

DELHI: Discounts and offers from real estate developers are common, but this Navaratra was extra special with builders going over the top—bigger discounts, a variety of flexi-payment plans and freebies to attract buyers. The reason? The property market is witnessing a glut. According to Cushman and Wakefield, there was a 12% drop in new launches in the top eight cities and yet the supply is more than demand. Prices have remained flat (even fallen in some specific pockets) for quite a few months, there is no demand and the inventory is piling up. Basically, the industry is facing a slowdown from the past few months.

Industry experts say the reason for this drastic fall in sales across regions and slackened demand is high cost of borrowing. "Property prices in some of the established markets dropped on account of an oversupply situation," says Sachin Sandhir, MD, RICS South Asia.

Employment creation is another key factor driving prices, where Bangalore, Chennai, Pune, Hyderabad and NCR currently lead. "We are not seeing velocity in new job additions in cities like Mumbai and Kolkata. Both these cities continue to do well in the premium and luxury segment, but the budget segment is handicapped by the lack of affordability by the common man," says Om Ahuja, CEO, Residential Services, JLL India.

However, if one is to believe market analysts, prices are expected to move up in the second-half of 2014. "In the near to medium term, the growth momentum will not be the same as it used to be during the boom period between 2006 and 2008. However, economic indicators suggest that the market will start growing gradually after the general elections," says Sandhir.

The emerging areas still have ongoing projects and developers are continuing to hold on to their prices in the hope of markets to improve. "Most cities have oversupply in specific pockets, and some key pockets still continue to see a shortage of supply when compared to demand in that pocket. We haven't seen price correction in the key pockets of most cities," says Ahuja.

Demand exceeds supply in areas like Mount Road, Adyar and Nungumbukkam in Chennai, while the demand in North Chennai is not catching up with the supply hitting the ground. This reflects in the capital appreciation of these areas. Demand in the Bandra-Andheri belt, Worli and Powai in Mumbai is far higher than the supply. Meanwhile, demand in areas like Wadala and Lower Parel is not catching up with supply, and this has reflected in slower capital appreciation.

So, are all these offers and schemes temporary and can be withdrawn once the sentiment turns around? "We don't see any serious price correction or slowdown in capital appreciation and the offers currently being rolled out by developers will have limited shelf-life," says Ahuja.

It therefore might be a good time to buy—haggle and avail of as much discount as you can. However, be careful of not making a bad choice. The most cash strapped would offer the highest discounts, but the trick to find a good investment in this market would be to look at specific pockets of the each city where supply is limited to ensure that the room for appreciation is good, and not get caught by investing into areas where supply exceeds demand. Here is a table on last one year residential property price trends in different pockets of a few major cities to help you identify a sweet spot:

 

Buying a property? Pick one before elections are over

 

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