Realty: Time to grab best deal
Wednesday, 9 July 2008
It may not really be the best time for the real estate market. The slowdown wave has been haunting the sector. If that was not enough, rising inflation levels and the recent hike in home loan rates by leading banks have further compounded the woes of prospective property buyers. But is there a silver lining? With speculations rife that prices are expected to correct in the near future, many people are continuing to hold their decision to buy property. But the question really is: for how long should one stay in this wait 'n' watch mode?
Experts suggest that there will be a slowdown as the market goes through a correction phase, which will resolve itself within a year and a half. "One should consult an unbiased market analyst before making any property purchase. The market is currently in a state of extreme flux because of a liquidity crunch and muted sentiments.
A correction, if it happens in any location, will take four to six months to happen, depending on the market trends in any particular location and the holding capacity of the developers," says Anuj Puri, chairman and country head of global real estate consultancy Jones Lang LaSalle Meghraj (JLLM).
According to JLLM, certain overheated micromarkets in Gurgaon, Noida, Pune, Bangalore and other places will in all probability see a 5-15% price decline. A correction of up to 10% is also expected in South Mumbai, some locations in Mumbai suburbs and certain areas of New Delhi that have seen unrealistic price trends.
"Developers will face increasing problems with completing ongoing projects and launching new ones, which will cause incoming supply to reduce and absorption of existing supply to take longer than anticipated. Potential buyers will have less disposable income to buy property and will naturally defer intended purchases even further," adds Mr Puri.
Other Side Of The Coin
, however, have a different take. Real estate developer Vipul, for instance, claims to have registered a good number of bookings for most of its projects. Punit Beriwala, MD of Vipul, feels that though there is a slowdown in demand in the luxury segment, there is still no let-down in demand for the mid-segment.
"The market is primarily dominated by the actual users who are from middle-income groups. This is a good time for them to buy property since they can bargain for the best deals. The small investors can wait for investing in the market since they would not have good returns with the sector witnessing a correction. They can wait for a couple of quarters before investing in the real estate market."
Others feel that the decision to hold on to a property largely varies depending on factors such as location and budget. "Prices in areas like New Gurgaon, Naharpar in Faridabad, Bhiwadi, Daruhera and Greater Noida are expected to see a dip in the future. Hence one should wait till February before buying property in these areas," says Vijay Jindal, CMD of SVP Builders.
But not everyone feels that a correction will follow as the basic impact of high inflation is price increase in all areas like construction cost, land cost, marketing and development costs. Hence, if input costs go up then the prices of real estate are bound to move up. "Most builders have already increased the price by 20% even if there are no sales. Only some builders may reduce price owing to desperation and to increase their cash flows. I personally feel there will be no dip in the market from now onwards," asserts Kushagr Ansal, director of Ansal Housing and Construction.
Most of the developers claim that they are not delaying their projects owing to the current market situation. But for the consumer, the higher rate of EMIs due to expensive home loans is bound to affect the overall project sales.
The current dynamics in the real estate market are no doubt restrained at the moment. However, for the end-users, the demand still remains robust as they can bargain for lucrative deals. The decision then to hold on or to buy a property would also depend on grabbing the best property deals in these tough times.
Experts suggest that there will be a slowdown as the market goes through a correction phase, which will resolve itself within a year and a half. "One should consult an unbiased market analyst before making any property purchase. The market is currently in a state of extreme flux because of a liquidity crunch and muted sentiments.
A correction, if it happens in any location, will take four to six months to happen, depending on the market trends in any particular location and the holding capacity of the developers," says Anuj Puri, chairman and country head of global real estate consultancy Jones Lang LaSalle Meghraj (JLLM).
According to JLLM, certain overheated micromarkets in Gurgaon, Noida, Pune, Bangalore and other places will in all probability see a 5-15% price decline. A correction of up to 10% is also expected in South Mumbai, some locations in Mumbai suburbs and certain areas of New Delhi that have seen unrealistic price trends.
"Developers will face increasing problems with completing ongoing projects and launching new ones, which will cause incoming supply to reduce and absorption of existing supply to take longer than anticipated. Potential buyers will have less disposable income to buy property and will naturally defer intended purchases even further," adds Mr Puri.
Other Side Of The Coin
, however, have a different take. Real estate developer Vipul, for instance, claims to have registered a good number of bookings for most of its projects. Punit Beriwala, MD of Vipul, feels that though there is a slowdown in demand in the luxury segment, there is still no let-down in demand for the mid-segment.
"The market is primarily dominated by the actual users who are from middle-income groups. This is a good time for them to buy property since they can bargain for the best deals. The small investors can wait for investing in the market since they would not have good returns with the sector witnessing a correction. They can wait for a couple of quarters before investing in the real estate market."
Others feel that the decision to hold on to a property largely varies depending on factors such as location and budget. "Prices in areas like New Gurgaon, Naharpar in Faridabad, Bhiwadi, Daruhera and Greater Noida are expected to see a dip in the future. Hence one should wait till February before buying property in these areas," says Vijay Jindal, CMD of SVP Builders.
But not everyone feels that a correction will follow as the basic impact of high inflation is price increase in all areas like construction cost, land cost, marketing and development costs. Hence, if input costs go up then the prices of real estate are bound to move up. "Most builders have already increased the price by 20% even if there are no sales. Only some builders may reduce price owing to desperation and to increase their cash flows. I personally feel there will be no dip in the market from now onwards," asserts Kushagr Ansal, director of Ansal Housing and Construction.
Most of the developers claim that they are not delaying their projects owing to the current market situation. But for the consumer, the higher rate of EMIs due to expensive home loans is bound to affect the overall project sales.
The current dynamics in the real estate market are no doubt restrained at the moment. However, for the end-users, the demand still remains robust as they can bargain for lucrative deals. The decision then to hold on or to buy a property would also depend on grabbing the best property deals in these tough times.