DELHI: Makeshift tents erected by real-estate brokers were a common sight across Noida until a year ago; so were home shoppers hopping between new apartments.
Those tents that once bustled with activity are gone now, and the odd broker in sight is not interested, as home sales have come to a standstill in the middle of an election season with buyers waiting for the poll outcome.
"There are zero sales happening right now," says Noida-based developer Shakti Nath, managing director of the LogixBSE 5.45 % group. "Buyers are in no mood."
The mood of home buyers has gone sour over the past few quarters because of the messy situation that the economy is in. High property prices, rising cost of loans, sticky inflation and the fear of job loss in a slowing economy have been keeping buyers away. Many are waiting for the outcome of the parliamentary elections, hoping that it will help end political uncertainty and bring in a stable policy regime.
"The only way sales will come back is if people start to feel confident about their long-term future. Only then will they take on a long-term liability like a home mortgage," says S Sriniwasan, chief executive of Kotak Realty Fund, a real-estate private-equity fund. "At the moment they don't have that confidence."
While home sales have been slow across the country for the past 12 to 18 months, the last few months have been particularly bad. According to data from property research firm Liases Foras, unsold inventory levels have risen from 650,000 apartments in the quarter through December to 700,000 at the end of March.
In the past three months, the nation's top eight cities have seen close to 700 new project launches - Mumbai topped the list with 200 projects, followed by Pune with 140 launches. But brokers say sales are happening only in the pre-launch period of a project.
"Developers are launching with the hope that sales will happen, but only pre-launch inventory is moving because it is at a considerable discount to market rates," says Feroze Abdulla, managing director of Feroze Estates, a Bangalore-based brokerage firm. "It's a stalemate otherwise."
This is a buyer's market - where developers are willing to offer big discounts - but sales have still been slow.
On the Noida Expressway near Delhi, developers are offering several new payment programmes where a buyer, for instance, pays only 40% upfront and rest at possession. For the buyer, this arrangement offers an effective discount of 15-20%.
"People are sitting on the fence. They want to see what will happen in the elections," says Lalit Kumar Jain, chairman of the Confederation of Real Estate Developers Association of India. "A stable government will pull home sales back on track."
As the end of elections comes near - counting is on May 16 - and it becomes increasingly clear that India could see a stable government, the change in sentiment is already visible in some segments - for instance, the benchmark stock index, BSE Sensex, hit a record Monday. There have also been indications that the worst for the economy may be over, with many economists predicting growth to pick up momentum.
"Capital markets usually sense improvement in an economy earlier than others," says Sunil Rohokale, managing director of Ask group, which manages a private-equity fund that invests in residential housing projects across India.
"But on the ground, when it comes to people buying homes, it usually comes with a lag," says Sanjay Dutt, executive managing director, South Asia, at property advisory firm Cushman & Wakefield. If a stable government comes, he expects the coming Diwali season - when buying assets is considered auspicious -to be a good one. "And in the six months after that will see a bull run where home sales velocity will pick up."
The only sales happening today are in the secondary market, where end-users, who are desperate to buy and have the money, are picking up properties from investors at deep discounts. These investors had bought multiple properties in places such as Gurgaon, Noida, Mumbai, Pune and Bangalore over the past few years and have been trying unsuccessfully to exit.
"Home sales are far from brisk, particularly in the metro cities," says RV Verma, chairman of the National Housing Bank.