After a lacklustre festive season last year, which many hailed as the worst in a decade for the real estate sector, there seems to be some improvement in the buyers sentiment this year as market experts see demand coming in for projects that are either complete or are nearing completion.
If the festive season few years ago used to be all about new project launches and pre-launches — with buyers booking a home only to be occupied in 2-3 years time — the experience of long delays have instilled a sense of scepticism among them. The buyer is only looking to invest in a project where he/she can witness that the building structure is either complete or nearing completion and where work is progressing at a good pace. The poor market situation, however, has opened up the opportunity for the investor to get a good bargain along with the usual festive perks.
The slowdown over the last few years has changed the shape of the real estate market. Both developers and buyers appear to have learnt from the past experiences. If developers are focussing more on completing their projects to offer possession, buyers are playing it safe and are only going for projects that are either complete or are nearing completion.
As a result, new launches have reduced significantly. From being an option for real estate players to monetise their assets, it is now a tool that seems to be viable only for credible developers.
“This year is certainly better than the last two or three years as buyers are looking to buy a house in a project that is either complete or is nearing completion. They are also getting attractive discounts from the developers,” said Santhosh Kumar, COO, JLL India. He, however, added that barring in a few cities, there are not many new launches this year.
Similar to the festive season in 2015, the advertisement hoardings of fresh project launches are few and far between this year too and so are the numerous enticing offers of free gold coins, car or other consumer durable items on booking in a newly launched project. Insiders say that developers are willing to negotiate with buyers when it comes to booking a house, but they are unwilling to announce the discount as in that case their existing buyers in the project may feel cheated.
As a large number of developers are saddled with high unsold inventory and are stressed for funds to complete their projects over the last few years, the focus in the market is primarily on completing existing projects before the launch of new project. Some feel that such a focus from developers is helping in improving the market as it gives homebuyers the confidence to make investments and own a house.
Developers also agree that things have improved this year on the back of a decline in interest rate and some drop in real estate prices. “We expect our sales to grow by around 20 per cent this year. Overall, there are very few launches in the market, but we being largely in township development and operating in the affordable segment have not seen much impact on that front. We are working towards consolidating our business and completing and delivering on our township projects,” said Arun Khurana, chief strategist, Omaxe Ltd.
Harinder Dhillon, senior VP, Raheja Developers said that while the company has not launched a project in this festive season, it is offering up to 30 per cent discount on their ready to move in properties. “The market is showing some signs of improvement and the demand is more towards properties that have been completed.
We are offering a price discount of up to 30 per cent on our ready to move in properties,” said Dhillon. While the company had launched its project Raheja Maheshwara in South Gurgaon in February 2016 only, he said that going forward the developer will launch more projects.
Even Wave group is offering international trip and gold coins on booking of flats and plots in Wave City this festive season in a bid to attract buyers.
While the sales in the housing segment this festive season is likely to be driven by inventory that is complete, market participants do see a pick in project launches going forward as they see green shoots of recovery in certain markets.
The CEO of a housing finance company said that there has been a rise in demand for houses in the affordable segment, especially in the Tier II and Tier III markets.
If a drop in interest rates on home loans over the last 18 months has helped in bringing buyers into the market, some say that a drop in interest rates by another 100 basis points over the next one year along with the broader economic growth may just boost the housing market.
“The prices currently are at the rock bottom and it is a good time to buy. A cut in interest rates may lift the housing demand over the next one year and the prices may shoot up,” said Khurana.
A report released earlier by Knight Frank shows that there has been some revival in the housing market and the first half of calendar 2016 showed not only pick-up in sales of housing units but also witnessed a jump in the pace of unwinding of unsold inventories. While the sales jumped for the first time in last three years from 1,26,616 units in H1 2015 to 1,35,016 units in H1 2016, the decline in the unsold inventory was the sharpest in last two years as it declined from 6.91 lakh units in H2 2015 to 6.6 lakh in H1 2016.