Real estate investments lukewarm this festive season: Assocham

NEW DELHI: Notwithstanding the 125 bps rate cut by RBI this year and offers made by developers, investment in the real estate market has remained lukewarm in and around Delhi-NCR primarily due to the lack of confidence in the economy and project delays, a survey has found. 

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The industry chamber had conducted a random survey of nearly 125 real estate developers in Delhi-NCR (National Capital Region). The survey reveals that demand for buying property has decreased by over 30 per cent over the last year. 

"The sentiment in the housing market is really at a low key. The prices have almost crashed but they are still unaffordable. Be it Rohini, Dwarka, South Delhi, Noida, Gurgaon, the prices of property are down by 25-30 per cent as compared to the last two years," Assocham Secretary General D S Rawat said. 

According to the survey, inordinate delays in getting necessary approvals from multiple authorities result in cost and time overruns. The resale or secondary market is also dull this festival season as there is very little resale happening especially in the NCR and surrounding areas. 

Besides, the residential market has witnessed a steep decline by 25-30 per cent in new launches as well as demand resulting a significant shrinkage. The unsold inventory pressure in NCR region is the highest among all other cities. 

A majority of real estate developers in NCR said about 62 per cent of the unsold real estate in the region is in areas which are currently uninhabitable. The problem has been confounded by delays in regulatory clearances and litigations. 

The NCR residential market still has an estimated 1,70,000 units of unsold inventory which is approximately 30 per cent of the units under construction, adds the survey. As per the survey, there are nearly 8.5 million workers engaged in building and other construction activities in India. 

The ticket price 3-bedroom, 2 BHK and single room flats has seen correction by 30 per cent in Noida, 25 per cent in Gurgaon and 15 per cent in some key areas of Delhi, yet the demand stays subdued, the survey pointed out. 

Modular kitchen, LED televisions and air conditioners are among the most common freebies on offer this Diwali. Some developers offered hefty discounts to the basic sale price for early investors. Many others warned of sharp revision in property rates post Diwali. However, the lure of freebies failed to charm home buyers, the survey noted. 

Source - ET

Festive season will have little to cheer realty industry

With affordability and safety of investment being the key for home buyers, the latest round of repo rate cut by the Reserve Bank of India (RBI) may see only a marginal improvement in demand and may not act as a catalyst to stimulate sales in this festive season.

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After the announcement of unexpectedly high 50 basis points cut in repo rate by the RBI on September 29, it was expected that the move would improve market sentiment, leading to increased demand and more sales especially as only a part of the multiple rate cuts amounting to 75 basis points effected this year before September 29, was passed on to the consumers by the banks. 

But now, within a week of RBI announcement, the hopes of real estate developers and home buyers seem to have been belied as the banks have not transmitted the cut to the consumers. The State Bank of IndiaBSE 1.29 % (SBI), which earlier announced a 40 basis points cut in its base rate, has now revised its decision by reducing the base rate cut by 50 percent to protect its margins.

Few other banks had announced 20-30 basis points cut in their base rates and home loan rates are still hovering well over nine percent. What is more confusing is the SBI's new policy to offer home loans at 20 basis points higher than the base rate to women and 25 basis points higher than the base rate to men in contrast to its earlier policy of offering home loans to women at base rate and to men at five basis points above base rate. In this scenario, the inability of the banks to transmit the RBI rate cut to home buyers is sending negative signals. 

This has worried both the industry chambers like Assocham and Credai, the apex body of real estate developers who have demanded stimulus in the form of tax incentives and supporting measures like introduction of teaser loans besides passing on the RBI rate cut to consumers.They feel that things have hardly changed during the last one year with home sales taking a beating.

Despite the developers trying all kinds of marketing gimmicks including subvention schemes with upfront payment as low as 5 percent of home price, interest waiver for 2-3 years and freebies, sale velocity has not picked up. Rather, it is a matter of concern that during the first half of this year, the sales have plummeted by 50 percent. 

Both investors and end users have deserted the residential property market - investors due to slow moving market with stagnant or dipping prices and end users due to unaffordable prices and concern about the safety of their investment because of massive delivery defaults. 

These investor-led markets have largest number of delivery defaults and highest unsold units. NCR tops with 232,000 lakh unsold units, followed by Mumbai with 170,000 units while Bangalore, Pune and Chennai have 111,000, 70,000 and 60,000 unsold units respectively.

The extraordinarily high inventory and muted sales call for price rationalisation. RBI Governor Raghuram Rajan had asked developers to cut prices to spur sales in view of high unsold inventory. 

Even Credai chairman Irfan Razack, immediately after taking over, advised developers to offload high inventory by rationalising prices. But developers are holding on to prices on the ground that low margins due to steep rise in input costs and high cost of loan sevicing, do not give them enough leg room to bring down prices. 

But what they are ignoring is that the latent demand is not getting translating into sales due to affordability concerns. Today, considering the median house price to average annual income ratio, the affordability is quite low. 

In Delhi NCR and Mumbai markets, it is double the ideal ratio of 5-6 ,though in cities like Bangalore, the ratio is more or less favourable. Instead of offering direct price discounts, developers are offering indirect discounts in the form of club fee, registration and stamp duty waiver.

Besides unaffordable property prices and high interest rates, long delays in project completion is proving to be a home buyers' nightmare. It is a double whammy for them as due to delayed delivery, they are forced to bear the burden of both EMI and house rent, especially when the job market is unfavourable. 

There is no price relief to home buyers even for newly launched projects. During festive season, it's been a standard practice with developers to launch new projects at attractive prices.

Developers are also banking on NRIs. They are reaching out to them through many property portals and through property fairs at their doorstep. After the devaluation of rupee against dollar,followed by cut in interest rates.NRIs are taking interest in residential property in India. 

In addition, there are attractive financial deals and allied services like property management, PIO card, bank finance and assistance regarding fund repatriation to woo them. Quite a few developers focusing on NRIs are attributing 10-20 percent of their total sales to them. 

However, domestic home buyers, especially end- users who form the bulk of customers, are not enthused enough to jump in the fray. They still seem to be waiting for prices to fall.And in the backdrop of interest rate dampner, it looks unlikely that this festive season will turn out to be a saviour for both developers and home buyers and the realty sector may take longer to ride out the current slowdown. 
 

Source - ET

Why festive season is the ideal time to buy a home

Experts believe that the real estate sector has a lot of unsold inventory in the luxury space but not in the affordable housing space where there is a major supply shortfall.

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Hence, the customer has to first segregate both these markets and adopt a suitable approach for each of them that effectively enable them to get the best deal. In the luxury space, it's clearly a buyer's market; hence, the buyer can name his price within the region. A 15-20 percent discount below the listed price is possible in projects where the developer has a high debt.

Rohan Bulchandani, co-founder and president, Real Estate Management Institute (REMI) and The Annet Group explains, "The festival period, starting around Janmashtami (August-September) through the end of the year, is the ideal time to buy a home in Mumbai. It would appear that this period creates an almost perfect convergence of the three key elements required for a property transaction to culminate: demand, supply and money."

Buyer-led demand

For most Indians, the purchase of one's home is perhaps the most significant life-investment, requiring a large capital outlay and as a culture deeply rooted in spirituality, religious sentiment and superstition, there is a significant bias towards making such an important life-purchase decision during the festival season.

Developer-led supply

Developers are acutely aware of the buyer-led demand phenomenon during the festive period. Sluggish sales of completed homes over the prior months, have led to a glut in the finished goods inventory, which developers are now keen to offload. As many developers are faced with this situation, the competitive environment drives them to differentiate themselves by offering innovative deals in order to attract customers.

Bank and Housing Finance Corporations (HFCs)-led money supply

To further facilitate property transactions during the festival season, banks HFCs also play their role, in capitalising on the opportunity to increase business for them. In addition to interest rates and EMI reductions, institutions often sweeten their offerings by eliminating the processing fees, waiving customary pre-payment penalties and by including free property and accident insurance.

Things to keep in mind for value picking

"Pick projects where the developer has a good track record of quality, on-time delivery, amenities being delivered across other projects, etc. For the affordable housing space, always go with a branded developer with a high reputation; pick a project which is an integrated township near a railway station. Look for a place where people are already residing or the pos session is only a few months away. This way, the customer can be sure of the amenities being de livered and also that utilities such as water, electricity, etc, are not a problem," suggests Rohit Poddar, managing director, Poddar Developers.

Buying a property is a one-time decision for many, so while buying a property during the festive season; buyers should focus on the budget and the connectivity of the area as they are the most important factors one should keep in mind for value picking.

Gaurav Shah, director sales and marketing, Ravi Group, feels, "The cost of the property plays an important role, whether the buyer is buying an under construction flat or a resale property. If the cost is not considered, the dream home could end up becoming more of a worry than an escape. Another prime factor is the connectivity. The area should be well-connected to schools, colleges, hospitals, markets, shopping places and bus, train stations. The location is often an afterthought when it comes to purchasing a property because nowadays, buying a property in Mumbai is an expensive affair."

According to experts, the festive season creates a win-win-win situation wherein buyers, developers and financiers, all benefit from the appropriate environment. Historically, property transactions increase by 25-35 percent during the festive season and in certain cases, upto 40 percent of sales take place during this period.

Source - Property News

Real estate sector waiting for the upcoming festive season

Hyderabad

From participating in property shows to devising marketing strategies, real estate companies are all geared to capitalise on the upcoming festive season and expect a 15 to 20 per cent rise in sales.

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Industry players active in the city's real estate scenario are waiting for the upcoming festival season of Dussera and Diwali, when families make major purchase decisions not just for electronic goods and automobiles but also the major decision of buying a house. Ram Reddy of SMR Iconia says, “It is the right time to launch projects, and this season should see people book homes they have been wanting to for a long time.“ Right from sravan maasam, which falls in the month of August, till the festival of Diwali, that is falling in the second week of November this year, the time period is considered to be auspicious for making purchases of movable as well as immovable assets and that includes houses,“ says Sai Kumar Naidu of Aditya Constructions.

Trade shows and exhibitions are lined up to help buyers decide. Unlike last year, this year 80 per cent of stalls have already been booked for upcoming property shows. Dasarath Reddy, president TREDA says, “There will be a 10 to 15 per cent rise in house bookings at the upcoming property shows in the city.“ Sai Kumar Naidu is hoping for a 15 to 25 percent increase in sale bookings during the festival season. “We are expecting a 30 per cent rise in sales during this year's festival season,“ says Anand Reddy of PBEL.“We have seen a rise in enquiries since May this year and expect a rise in sales by 15 to 20 per cent,“ says Minoo Vasaigara of Namaha Estates.

In order to capitalise on the upbeat mood of customers during the year's festival time period, marketing strategies of real estate companies also will get scaled up. Incentives such as giving away of freebies like air conditioners, two-wheelers, etc., are in store for those who are planning to buy a house in the upcoming festive times. Builders are also giving financial incentives to help jack up sales.

Apart from the few real estate companies that have freebies in store to give away, majority of industry players have planned to increase their advertising budgets for the season. “We will increase our advertising both in the print media and online media during the festival time,“ says Ajay Salike of Armsburg Properties. Ram Reddy states that the builders of Hyderabad have learnt a lot from the past few years of sluggish sales, the customer can now expect the best offerings.

Source - MB