Best time to negotiate on Property Prices!
There has never been a better time than now to negotiate on residential property prices in India. Following the prolonged slowdown in the economic situation across the country, there has been a considerable slump in the demand for residential property across major cities in India. This has resulted in the pile up of unsold inventory for many residential projects with developers facing a serious liquidity crunch. This has forced developers to be more accommodative, by heeding buyers’ requests for agreeing on price negotiations, so as to liquidate their unsold inventory. Even though price negotiation benefits the developer indirectly it works in the favour of the buyer as well as he can negotiate a good deal with the developer in buying his dream home.
There are two major aspects based on which price negotiation can be initiated. They are:
· Demand-supply dynamics
Demand-supply dynamics being a basic premise of economics applies in the sale of residential property as well. When the demand for residential property is high the price negotiation works in favour of the developer as he can quote a higher price. On the contrary, when there is surplus of supply as is the case in the current scenario, price negotiation works in the buyer’s favour as he can negotiate a lower price that what the developer has quoted. To negotiate a good price deal, both the buyer and the developer should be aware of the demand-supply dynamics that exists in the market at that point in time. This depends on various factors such as the present market situation, the market sentiments as well as the macro-micro market dynamics.
The macro dynamics depends on various factors such as the General elections, national level industry reforms, the industry watchdog allocations, rise in prices of raw materials and construction costs, the GDP rate of the country as well as the change in the demand and supply of raw materials on a national level. Micro dynamics include new growth corridors at the state level, development of new roads, flyovers, expressways, metro lines, railway lines, airports, seaports, municipal corporation elections and so on. Some of the other factors affecting the property prices in a market include the inventory-overhead ratio, the construction level and progress of the project, the age of the property, the neighbourhood, the features and amenities in the surroundings, the local investors as well as the proximity to neighbouring states.
· Market trend analysis
While negotiating the property price with the developer it is essential to be aware of the price trends persisting in the local market with relation to previous quarters and previous years. Besides, the buyer should also know about the existing prices for similar projects in the area so that he will be able to negotiate better with the developer. Moreover, he should find out since how long the property has been put up for sale and has remained unsold. If the property has been remained unsold for long since it has been put up for sale, the buyer will be able to strike a favourable deal.
It is also important to find out the launch price of the project as well as the current price. If there is considerable reduction in the current price, it means that it has been unsold for a long time due to which the developer has reduced the prices. Brokers can also provide valuable insights into the discount that the buyer can expect from the quoted price. Previous buyers can also give first-hand information regarding the discount that they have availed while buying property. Two important aspects in this regard that the buyer needs to gauge accurately is the cash-flow or cash liquidity of the developer as well as the number of unsold units of the project. This will give him an idea about his bargaining capacity. The lesser is the amount of liquid cash at the disposal of the developer and the more the number of unsold units, there buyer can expect a higher discount that the amount quoted by the developer.
