Delay in purchasing by buyers is causing prices to fall
D
rop in prices of residential properties might have been a buyer’s dream until recently, however currently it’s as real as it can get. Although the realty industry remains somewhat in denial, according to transaction data collated from banks and housing finance companies by a recent survey conducted by the National Housing Bank (NHB) establishes that realty prices have indeed decreased within most parts of the country.
As per the survey, 22 out of 26 cities have witnessed a downward trend within residential realty prices within the period from April to June as compared against the previous quarter. The industry however, is skeptic and dismissive of the survey.
With Diwali coming round the corner, a multitude of new launches as well as deliveries have been planned around that time. On the flip side, numerous offers which have had been in the making for months and were considered ready to be lined up for the festive season are now under review once more with more effort being put into them again.
The recent move of Reserve Bank of India (RBI) striking down the 80-20 subvention scheme is being viewed as a spoiler for the already slumping sector. Under the 80-20 scheme, the property buyer would pay only twenty per cent of a property’s cost upfront while the developer would pay the equated monthly installments (EMI) to the bank until the house is handed over to the buyer.
For the industry which has been hard at work battling the gruesome slowdown, this season of Diwali would be a litmus test. Almost one-third of the total sales of residential unit occurs during this period.
Almost everyone right from the developers to brokers along with industry experts and real estate analysts are anxious to learn whether the period would encourage a property-purchasing spree while clearing the piled up inventory or would the existing market conditions prevail.
Deciding time:
However, paying attention to the two kinds of prices which are the asking price and transaction price, one can make a calculated prediction on the side to which the realty market would tilt.
The asking price also called as the published rate might be holding on, while the amount at which the transaction is completed could be significantly lower. Presently, nobody is ready to pay the developer’s asking price; with only developers who are willing to compromise on price are able to sell. This is evident with the secondary market experiencing a very definite decrease in prices.
Real estate experts believe that the price levels of new launches around Diwali would provide a sense of the direction in which the realty segment is headed, while the potential and performance of the sector can correctly be assessed only after the 2014 general elections.
A buyer’s market:
In the meantime, as per the NHB survey, in recent years this is the first time that prices of residential unit have fallen significantly and simultaneously across all the major cities.
The current scenario offers a lucrative position to buyers as there is a lot of scope for some more price correction. Despite a rise in input cost, builders are now prepared to incur more reductions within their margins, in order to be capable of clearing their inventory, have liquidity as well as increase demand.
Within markets such as Delhi NCR and Mumbai, a downtrend may not be reflected by the official rates, however backroom negotiations are slashing prices.
