Price stagnation and inventory pile up lead to fewer buyers in Mumbai and Delhi

Q: What are the factors that affecting project launches in Mumbai and Delhi?

Praveen Modi, Mumbai

10th April 2015

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Replies (7)

Yes Praneetha,
All of us are aware that neither of Active component is going to reduce, yes passive can reduce but that is already at bottom line. If you are looking for house than this is the best time to click the deal. Yes! you can negotiate for passive components with developer, but to some extent because developers are playing with paper thin margins.

Lalit Verma, Mumbai

15th April 2015

Comment

The real estate price is dependent on two main component you can say (A) Active and (B) Passive, which regulate the market. The Active component is governed by cost of FSI or FAR, this is the cost builder pays to buy the land and 2nd is cost of the project development. Passive component is mainly cost incurred for Project marketing, interest, administrate and brokerages etc. Please note Active component is constantly increasing, land or materials or labour cost.

Praneetha, Delhi-NCR

14th April 2015

Comment

The correction has just started and still there is no panic selling in the market. So buyers, who are buying a property for investment, should delay it by 1-2 years. However, end users are limited by several other factors like marriage, birth of kids, getting a better job, etc, and therefore it may be difficult for them to delay the decision. However, they should also note that this is a buyers' market and therefore, have to bargain hard.

Artharaj Realty, Pune

13th April 2015

Comment

Hi Pravakar,
i am telling you what exactly happening in the ,market. After holding on for 2 years without hardly anything happening, investors and builders have lost their patience, and are even offering small discounts to move their holdings. They are not cutting rack rates, but are offering good discounts in the form of freebies like flash sales, attractive payment plans, free parking, free stamp duty and registration, low interest of loan, etc.

Shantanu Kumar, Mumbai

12th April 2015

Comment

As per my point of view, price stagnation is probably the first sign of a bear market in real estate. Prices remaining flat for the past 2 years is an indication of time correction. This is important because the money could have gained better earnings from other investments.

Pravakar Saxena, Pune

11th April 2015

Comment

Hi Lait,
How long will this trend continue in Delhi and Mumbai? Do you see any improvement in those city? How?

Vasanth,

10th April 2015

Comment

Well Vasanth,
The new development rules by the Maharashtra government, once put into law, should add a lot of supply to the market. So, the relief may last till real estate prices become affordable once again.

Lalit Verma, Mumbai

10th April 2015

@lalit,
So, what should one do now?

Vasanth,

10th April 2015

It depends on whether you are in the market to buy or sell. Sellers should not bother too much about the 5-10% discount, and let their property go. This loss can be recovered in a year's time from safe instruments like bank FD. In addition, they may be forced to hold on to their property for another 4-5 years to get the same price.

Lalit Verma, Mumbai

10th April 2015

Right Lalit,
They are also offering big price discounts to bulk buyers. Discounts largely depend on the type of property and area. In large deals, due to type of property and area, builders are giving a discount of 15-20% for under-construction properties. On the other hand, the discount of 5-10% is very small in the ready possession secondary market.

Bhuvan, Delhi-NCR

10th April 2015

Hi Praveen,
The only reason is the current supply is significantly higher than demand. The only place where there is some demand left is in pre-leased commercial properties. Once investors realize this and begin to offload their stock, the price correction starts. This was clear in Delhi when investors tried to exit by offering discount to the market price.

Bhuvan, Delhi-NCR

10th April 2015

Comment

@Bhuvan,
What i see is that the real estate market is currently slow, and there is very clearly an overhang of inventory faced with such a situation. Developers are not even trying to increase prices. With consumption rate at a new low, builders are trying to get their volume back.

Lalit Verma, Mumbai

10th April 2015