Home buyers not fully convinced about recovery in real estate sector
Sales are happening mostly at the pre-launch stage — when prices are lower — of new projects
Oct 09, 2014
Source : The Economic Times
Real Estate Projects


The tents are back on the streets of Noida. An army of property brokers that sells the dream and lure of real estate has dusted out their makeshift offices, fuelled by hopes of an economic recovery. They are in for a wait. "There is great expectation, but sales will happen only when uncertainty is completely over in the minds of home buyers," says Shishir Baijal, chairman and MD of Knight Frank India, a consultancy.

"That is still some time away." There is some buying. According to Pankaj Kapoor, managing director of property research firm Liases Foras, sales are happening mostly at the pre-launch stage — when prices are lower — of new projects. "When the project is officially launched, the response has been slow," he adds.

Also buying are people who want a house to live in and can afford finished properties, several at a healthy discount from investors desperate for an exit. Samarjit Singh, managing director of IndiaHomes, a real estate brokerage, sees a signal there. "When the market starts to revive, distress offers by investors and discounts by builders are the first to be absorbed," he adds.

In spite of muted prices over the last few quarters, house sales have been slow, ITfilled Bangalore being an exception. Even the significant mark down in prices of new projects over comparable existing ones — 31% over June prices in the National Capital Region, according to Liases Foras — has not lured them. This indicates a more fundamental issue: buyers' assessment of affordability. Many home buyers are not fully convinced about a recovery.

They are also seeking greater surety and prosperity on their job front — which will mostly come nearing March 2015 — before committing to a lifetime purchase. But there is a silver lining. Brokers and builders are seeing more inquiries in the last three months. "They are getting out of their houses now," says Sumit Joshi, director of Noida-based real estate brokerage Real Credit Consultancy.

Adds Lalit Kumar Jain, chairman of the Confederation of Real Estate Developers' Associations of India: "The market is waiting for a trigger." That trigger could be an interest rate cut, improved GDP numbers or stock market gains. "Many fence-sitters should take decisions immediately after any of these triggers."

This festive season has not been a time for new launches. Buyers are not too keen and companies have a pile of unsold inventory. According to Liases Foras, the combined unsold inventory as of June was 765 million sq ft, or equivalent to 760,000 two-bedroom apartments, which will take about 35 months to clear at the current pace of sales.

Builders, especially in areas where the pain is greater (Noida, Greater Noida, Gurgaon, Navi Mumbai and Thane), are offering schemes on existing projects. Vatika, for instance, is offering ready apartments in Gurgaon on a 20% down payment and the remaining after 18 months, with no EMI or rent in the interim.

Ashutosh Limaye, head of research at property advisory firm Jones Lang LaSalle India, expects sales this festive season to be at least 20% higher compared to the last two years. "It is likely on account of current price and inventory levels, and the general positive sentiment prevailing," he adds. If it persists, the tents could be in business.

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