Further price corrections may not be plausible
With the rapidly approaching, auspicious festive season for property selling or purchasing, numerous prospective and potential buyers are planning to proceed with their property investment plans. However, the potential buyer should consider the factors such as whether or not the market is ripe for a price correction and provided the current state of the economy, whether they should hold out for a while longer.
As per real estate experts, the slowdown within the residential realty segment is here to stay at least till next year’s festive season. Depending upon the developer’s holding power and the housing projects, a correction ranging from 11 to 18 per cent is expected. A correction within prices beyond this level would adversely impact the profitability of developers to a non-acceptable extent.
Discounts and freebies:
As and when the pressure of generating liquidity via sales increases on the developers, discounts and freebies would be ruling the roost and would be the main source of alluring potential buyers. However, for certain projects aimed at the mid segment, a marginal correction within prices could be in the offing.
Market prospects:
During the past few years, the real time appreciation of property prices in tier-1 cities which have been adjusted for inflation has not exceeded 4 to 5 per cent. This would dissuade builders from reducing the prices of property, and especially force those developers with holding power to maintain their prices at the current levels.
The recent directive issued by the Reserve Bank of India which does not allow banks to lend money to developers under either the 80:20 or 75:25 schemes coming in so close at a time when traction is generally high as developers float these schemes to increase sales, has created ripples within the market.
This directive along with the depreciating currency, a stagnating policy environment and weak industrial output would impact the developers holding power who in turn would be forced to further reduce the prices. Further, all this combined would lead the market to remain sluggish in short to medium term.
Conclusion:
The present economic slump has adversely affected the real estate sector along with other industries. With the general anticipation of a further reduction in prices as well as the absence of any significant increase in prices, potential buyers have been very cautious about their decision to purchase new residential property. However, a tiny scope for further price correction exists because of the high inflation and increasing cost of raw material.
As per experts, projects possessing a good location along with excellent construction quality and amenities alone would be able to generate and attract the demand of buyers.
