For the last 3-4 years, residential real estate market has seen sluggish demand, which has caused the unsold inventory levels to go up in some of the key Indian geographies. Supply/demand mismatch in terms of price and configurations has been the main reason for the rise in inventory levels.
From developers’ point of view, this has eventually resulted in:
* Correction of prices in many markets to improve sales velocity of unsold products
* Increased project launches with the right configurations to cater to existing demand
Interestingly, 2016 had started on a sunny note. The residential real estate market, which had witnessed a slump in project launches in 2015, showed a visible comeback in the first quarter. There was a six-fold increase in launches of the affordable housing projects, as developers predicted greater demand in this highly price-sensitive segment.
- Real estate back on recovery path: Survey
- Residential Real Estate: Boosted by the IT boom, on Bengaluru’s eastern periphery, a buzzing suburb
- Sales of homes hit five-year low in Ahmedabad; dip in migration, say experts
- Real Estate: ‘New home launches dip 35% in 2017’
- Unsold Inventory: ‘Residential market may remain sluggish in near term’
- Residential property: With reviving homebuyer confidence, 2018 might see higher sales
One way or the other, factors have now transpired to make residential real estate a buyer’s market that gives buyers the upper hand. They have a lot of options to choose from, with the added benefit of flexible rates and attractive payment plans.
Gains of a buyer’s market
Real estate prices usually drop as inventory increases — but even if they don’t, negotiation power goes up. Some realtors refuse to understand the realities of a slow market and will not accept any offers less than what they feel they should get. If a buyer feels that he is not getting the best possible deal, he should be confident enough to walk away and look at the next option on the list. Remember that in a buyers’ market, it is the buyer who has the power. It pays to be aware of about one’s bargaining power. If the home has been in the market for several weeks or months, has perhaps already undergone some price reductions and is still unsold, it strongly suggests that the seller is hoping to sell it as soon as possible. In such a situation, it makes sense to ask the seller for add-ons such additional furniture or fixtures, apart from a heavy discount on the listed price.
Another inevitable result of heavy housing inventory on the market is that prospective buyers are confused about which options to focus on. This ‘problem of plenty’ can be resolved by looking only at select projects by reputed developers — it is surprising how quickly the range can narrow down if one eliminates anonymous smaller players from the field of vision.
Guidelines for buyers
* In the case of under-construction projects, buyers should only consider those which are likely to be completed in next 12-18 months.
* Again, going with developers who have a healthy track record of delivery will mitigate the risks related to timely delivery.
* It is also essential to undertake good diligence in terms of the project’s market response and inventory sold, which will ensure that project is delivered
* One should look only at established housing corridors where social and physical infrastructure are in place