Home buyers across the country expect real estate prices to fall by up to 10% over the next six months and they are willing to wait for over a year to buy property, a study by IIMBangalore and MagicBricks has found, signalling that festive season offers by developers have failed to attract buyers.
The Housing Sentiment Index (HSI) has dropped almost 20% over the past quarter across India, except in Bangalore, where sentiment has improved due to the uptick in IT industry. The aggregate HSI dropped to 93 from 117 in the previous quarter. An HSI of 100 suggests that buyers expect prices to remain at current levels while values lower and greater than 100 suggest that buyers expect prices to fall and rise, respectively.
The sentiment has worsened since the last quarter, until when buyers were expecting prices to rise. The percentage of buyers who expect prices to fall more than 10% has risen to 25% from 14% in the previous quarter. Almost a third of those surveyed said they were willing to wait more than a year before buying a property, something that does not bode well for the industry saddled with unsold units.
According to property research firm Liases Foras, at the end of the June 2013, the cumulative nationwide unsold inventory was 670 million sq ft. The National Housing Bank’s residential housing index, Residex, shows that 22 of the 26 cities it tracks have already seen a decline in home prices in the quarter to June and prices are expected to fall further. “A further 5-10% decline is expected in most markets,” said Sanjay Dutt, executive managing director of South Asia at real estate services firm Cushman & Wakefield.
Some correction in prices is already happening by way of freebies and promotions by developers. Waiver of stamp duty, registration fees, broker or agent’s bills, a foreign trip, a sedan, air conditioners, furnishings and modular kitchens worth several lakh rupees are some of the goodies on offer.
“Buyers are willing to strike deals if they find good value,” said Mudassir Zaidi, national director-residential at Knight Frank India. Apart from the freebies and promotions by developers, there are good opportunities to buy in the secondary market as several investors who had bought apartments over the last two years are desperate to exit and are willing to offer good discounts.
The worst is getting over, said Dutt, but added that it would still take six to twelve months for things to turn around. “The window of opportunity to buy at a good price is between now and the next monsoon,” he said. Buyers are hoping that political uncertainty will end with elections next year and with that the economy will also start to look up. “Buyers seem to prefer a ‘wait and watch’ strategy that could force developers’ hands to cut prices more aggressively to reduce inventory during the festive season,” said Professor Venkatesh Panchapagesan of IIM Bangalore.
The only market in the country where buyer sentiment is intact is Bangalore, with an HIS of 106, where buyers expect prices to increase albeit marginally. In the other seven major cities, the sentiment has turned negative, with Mumbai having the lowest HSI score of 81. The Telengana crisis has pushed the HIS score for Hyderabad to 83, a drop of 30%. The biggest drop, of 38%, is for properties in the Rs 2-5 crore category.
This segment has seen sales drop considerably in the NCR and Mumbai as the well-heeled also start to feel the impact of the slowdown. In Mumbai, sales of luxury homes have fallen 35% over the past three quarters while Gurgaon has witnessed a 40% drop in sales of such apartments. In Bangalore too, this segment has seen sales drop at least 20%, according to Liases Foras.
The Housing Sentiment Index (HSI) has dropped almost 20% over the past quarter across India, except in Bangalore, where sentiment has improved due to the uptick in IT industry. The aggregate HSI dropped to 93 from 117 in the previous quarter. An HSI of 100 suggests that buyers expect prices to remain at current levels while values lower and greater than 100 suggest that buyers expect prices to fall and rise, respectively.
The sentiment has worsened since the last quarter, until when buyers were expecting prices to rise. The percentage of buyers who expect prices to fall more than 10% has risen to 25% from 14% in the previous quarter. Almost a third of those surveyed said they were willing to wait more than a year before buying a property, something that does not bode well for the industry saddled with unsold units.
According to property research firm Liases Foras, at the end of the June 2013, the cumulative nationwide unsold inventory was 670 million sq ft. The National Housing Bank’s residential housing index, Residex, shows that 22 of the 26 cities it tracks have already seen a decline in home prices in the quarter to June and prices are expected to fall further. “A further 5-10% decline is expected in most markets,” said Sanjay Dutt, executive managing director of South Asia at real estate services firm Cushman & Wakefield.
Some correction in prices is already happening by way of freebies and promotions by developers. Waiver of stamp duty, registration fees, broker or agent’s bills, a foreign trip, a sedan, air conditioners, furnishings and modular kitchens worth several lakh rupees are some of the goodies on offer.
“Buyers are willing to strike deals if they find good value,” said Mudassir Zaidi, national director-residential at Knight Frank India. Apart from the freebies and promotions by developers, there are good opportunities to buy in the secondary market as several investors who had bought apartments over the last two years are desperate to exit and are willing to offer good discounts.
The worst is getting over, said Dutt, but added that it would still take six to twelve months for things to turn around. “The window of opportunity to buy at a good price is between now and the next monsoon,” he said. Buyers are hoping that political uncertainty will end with elections next year and with that the economy will also start to look up. “Buyers seem to prefer a ‘wait and watch’ strategy that could force developers’ hands to cut prices more aggressively to reduce inventory during the festive season,” said Professor Venkatesh Panchapagesan of IIM Bangalore.
The only market in the country where buyer sentiment is intact is Bangalore, with an HIS of 106, where buyers expect prices to increase albeit marginally. In the other seven major cities, the sentiment has turned negative, with Mumbai having the lowest HSI score of 81. The Telengana crisis has pushed the HIS score for Hyderabad to 83, a drop of 30%. The biggest drop, of 38%, is for properties in the Rs 2-5 crore category.
This segment has seen sales drop considerably in the NCR and Mumbai as the well-heeled also start to feel the impact of the slowdown. In Mumbai, sales of luxury homes have fallen 35% over the past three quarters while Gurgaon has witnessed a 40% drop in sales of such apartments. In Bangalore too, this segment has seen sales drop at least 20%, according to Liases Foras.
