Prices of residential properties in India were never this aam admi friendly with a gaggle of factors colluding to bring them down to almost garage sale levels. End users must, however, act fast — this window of opportunity is too good to last for long.
If you want to buy a house, now is the time for you to firm up the plan. Currently, new-launch apartments are available at almost 50% of the price of similar products prevailing a year back, though with lesser floor area and lower specifications. Be that as it may, these lower prices have brought houses well within the reach of middle class, whose monthly family income is around Rs 25,000 per month. In the National Capital Region (NCR), two bedroom apartments are now available at prices as low as Rs 15 lakh to Rs 20 lakh. As interest rate has fallen to 8% per annum (home loan rate at SBI for the first year), the EMI on Rs 15 lakh loan will come out to be Rs 12,500.
However, there are many end users, who are waiting for prices to fall further as has happened in the last one year — but the market trend suggest otherwise. Either prices will stabilize, or head northward.
Indian Builders have been forced to cut prices of their real estate products to beat the recession like condition in the sector, which was triggered by the market downturn. In fact, as property prices went up by 200% in the last five year, the common man found it difficult to buy a house. On top of that, a rise in home loan rates to almost 12% till the middle of 2008, also affected the sentiment.
The situation further worsened in the second half of 2008, when the global economy faced the worst financial crisis since the depression of 1929. This brought the entire real estate market to a grinding halt in the second half of 2008.
Property Developers were then forced to launch affordable houses for common man. But in the process, not only did they cut the per sq ft prices by almost 30% to 40%, they also reduced the size of apartments by almost 30% to 40%. The combined effect is that prices of similar apartments (2BHK or 3BHK) have fallen by half of what they were last year. Of course, the dimension and specification of new offerings are lower than those of earlier apartments.
But, more important, this brought them within the reach of common man – and also did the trick for developers, at the same time, as their sales picked up. This is evident from the pace at which some of the projects in the NCR got sold out. DLF could sell its 1,400 apartments in the condominium, Capital Greens, in Moti Nagar in Delhi in just two days. Similarly, Jaypee Greens sold its entire 3,500 apartments in its newly launched project Aman in Sector 150 in Noida in less than two days. More extraordinary was the fact that the builder selected buyers through draw of lots!
According to a report of real estate research firm PropEquity, the sale of newly launched apartments have gone up from 7% in the October-December quarter of 2008 to 14% in January-March quarter of 2009, and further to 21% in April-June quarter of 2009. This suggests that as prices have fallen, end users are coming back to the market.
Meanwhile, Indian economy has started showing some signs of recovery with industrial activity picking up. This is also evident from the fact that demand for office space is on the upswing. According to a global realty consultancy firm Cushman and Wakefield’s report on office space, “The demand for office space across the country in April-June quarter of 2009 increased in excess of 65% over the January-December quarter.”
At the same time, implementation of the award of Sixth Pay Commission to government employees has created a huge demand FROM large number of buyers, who were thus far finding it difficult to buy houses in NCR. The average salary of government employees has almost doubled in the last one year. On top of that, correction in realty prices also helped demand for residential unit to rise. As property developers see a good demand for their product, it is not very likely they will cut prices further. Besides, Pradip Jain, CMD of Parsvnath Developers said there is no scope for builders to cut prices further as they are already doing business on wafer-thin margin.
In fact, if economy revives and government manages to contain interest rates at low levels, demand for residential units will surge substantially, which could drive prices up again. Or at least, you would not be in a position to bargain for a better location in the condominium with developers.
In fact, in Mumbai, prices of apartments have started moving up because of revival in demand. As the city does not have much supply, a slight recovery has already pushed prices up in posh areas by 10% to 20%. At the same time, revival in economy will also make investors return to the market. This will also lead to increase in demand and will further push prices up.
However, as a large number of apartments are in pipeline in NCR, prices are likely to be under pressure for some time. But waiting to buy at rock bottom is not advisable, particularly if you want to buy to live, as in the process, you might miss a chance of a good bargain. It will be best if the present opportunity is seized to buy that ‘sweet home’ for yourself