A slowdown in the real estate sector can spell opportunity for the prepared. Delhi-based publishers, Umraopati Ray, 30, and his wife PriyankaSaxena, also 30, own an apartment at PaschimVihar. As the slowdown in the National Capital Region (NCR) intensified, the young couple went hunting for good deals. Recently, their efforts were rewarded when they managed to buy a flat at VasantVihar at a price 15% lower than the peak rate witnessed in the area in the past.
Pan-India slowdown
Real estate markets across the country are currently witnessing a downturn. In Mumbai, it has lasted for about a year now. Down south, it began about six months ago. The Delhi/NCR market was the last to be impacted by the slowdown, but here, too, the signs have been apparent over the past three months.
While developers have not slashed their prices overtly, the slowdown is visible in the drastic fall in the number of transactions. According to a Gurgaon-based broker, this figure has dwindled to 30% of last year's level. The speculators who had booked a large number of properties in the hope of exiting profitably in a rising market are now jettisoning surplus holdings, often at a discount. In the primary market (where you buy from a developer), the slowdown is evident in the large number of subvention schemes and discounts (ranging from 5-20%) being offered by cash-strapped developers. Another marker signalling a downturn is the widening gap between prices in the primary and the secondary markets (where you purchase from another buyer).
The downturn is most pronounced in the markets where speculation over the past couple of years had driven the prices high, though the infrastructure is not yet in place. The Dwarka Expressway area in the NCR, where the highway providing connectivity to the region has not seen much progress over the last year or so, is a prime example.
Prices are also correcting more steeply in projects where barely 20-30% payment has been made and possession is a couple of years away. Says Rajan Ahuja, executive director, Realty & Verticals, a Gurgaon-based real estate consultancy: "In such projects, buyers have begun to feel the pinch. If these get delayed amid the slowdown, there could be a lot of exits and prices could see a further correction."
Pan-India slowdown
Real estate markets across the country are currently witnessing a downturn. In Mumbai, it has lasted for about a year now. Down south, it began about six months ago. The Delhi/NCR market was the last to be impacted by the slowdown, but here, too, the signs have been apparent over the past three months.
While developers have not slashed their prices overtly, the slowdown is visible in the drastic fall in the number of transactions. According to a Gurgaon-based broker, this figure has dwindled to 30% of last year's level. The speculators who had booked a large number of properties in the hope of exiting profitably in a rising market are now jettisoning surplus holdings, often at a discount. In the primary market (where you buy from a developer), the slowdown is evident in the large number of subvention schemes and discounts (ranging from 5-20%) being offered by cash-strapped developers. Another marker signalling a downturn is the widening gap between prices in the primary and the secondary markets (where you purchase from another buyer).
The downturn is most pronounced in the markets where speculation over the past couple of years had driven the prices high, though the infrastructure is not yet in place. The Dwarka Expressway area in the NCR, where the highway providing connectivity to the region has not seen much progress over the last year or so, is a prime example.
Prices are also correcting more steeply in projects where barely 20-30% payment has been made and possession is a couple of years away. Says Rajan Ahuja, executive director, Realty & Verticals, a Gurgaon-based real estate consultancy: "In such projects, buyers have begun to feel the pinch. If these get delayed amid the slowdown, there could be a lot of exits and prices could see a further correction."
What's causing the slowdown?
The fall in the real estate market is only mirroring the slowdown within the economy at large. According to Anshul Jain, chief executive officer, DTZ India, "The weak economy has affected the demand for residential units. Inflationary pressures and lack of increments have left the buyers with no surpluses."
India's real estate sector, much like other sectors, is subject to cyclical downturns. Says Sanjay Dutt, executive managing director, South Asia, Cushman & Wakefield: "A lot of projects have been launched, so inventory levels are running high. Prices have also gone up a lot. Meanwhile, the sentiment is not so bullish." A negative feedback loop has set in. With quick gains becoming hard to come by, new investors are staying away from the market.
Real estate consultants blame the current slowdown on the speculative excesses in the past. Says Ahuja: "In markets like Dwarka Expressway, speculative buying and selling had pushed the prices to unsustainably high levels. A period of price correction was bound to follow."
Opportunity for buyers
In the popular imagination, the word 'slowdown' carries negative connotations. However, it spells opportunity for buyers who had found the prices moving beyond their grasp when the markets were rising. Those who had deferred the decision to buy may now go in for the kill, as the young couple— Rai and Saxena—has done.
As Dutt says, "This is a good time to buy, especially in projects and locations that would have been difficult to secure in good times." Vishal Dhawan, chief financial planner at Mumbai-based financial planning firm, Plan Ahead Wealth Advisors, says you are likely to get good deals in the secondary market, since the individuals who had invested in multiple apartments and are in desperate need of cash, will readily sell at a discount.
Jain of DTZ believes that the current slowdown will continue until a new government is in place after the general election in May 2014. Hence, buyers have time on their side. Sanjay Sharma, managing director, Qubrex, a Gurgaon-based real estate consultancy, advises patience. "This will gradually turn into a buyer's market. Make an offer and bide your time. Even if it takes three to four months to strike a deal, be patient," he says.
The fall in the real estate market is only mirroring the slowdown within the economy at large. According to Anshul Jain, chief executive officer, DTZ India, "The weak economy has affected the demand for residential units. Inflationary pressures and lack of increments have left the buyers with no surpluses."
India's real estate sector, much like other sectors, is subject to cyclical downturns. Says Sanjay Dutt, executive managing director, South Asia, Cushman & Wakefield: "A lot of projects have been launched, so inventory levels are running high. Prices have also gone up a lot. Meanwhile, the sentiment is not so bullish." A negative feedback loop has set in. With quick gains becoming hard to come by, new investors are staying away from the market.
Real estate consultants blame the current slowdown on the speculative excesses in the past. Says Ahuja: "In markets like Dwarka Expressway, speculative buying and selling had pushed the prices to unsustainably high levels. A period of price correction was bound to follow."
Opportunity for buyers
In the popular imagination, the word 'slowdown' carries negative connotations. However, it spells opportunity for buyers who had found the prices moving beyond their grasp when the markets were rising. Those who had deferred the decision to buy may now go in for the kill, as the young couple— Rai and Saxena—has done.
As Dutt says, "This is a good time to buy, especially in projects and locations that would have been difficult to secure in good times." Vishal Dhawan, chief financial planner at Mumbai-based financial planning firm, Plan Ahead Wealth Advisors, says you are likely to get good deals in the secondary market, since the individuals who had invested in multiple apartments and are in desperate need of cash, will readily sell at a discount.
Jain of DTZ believes that the current slowdown will continue until a new government is in place after the general election in May 2014. Hence, buyers have time on their side. Sanjay Sharma, managing director, Qubrex, a Gurgaon-based real estate consultancy, advises patience. "This will gradually turn into a buyer's market. Make an offer and bide your time. Even if it takes three to four months to strike a deal, be patient," he says.
http://articles.economictimes.indiatimes.com/2013-06-2/news/40166820_1_slowdown-real-estate-sector-dtz-india
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