Mr. Om
Ahuja, CEO – Residential Services, Jones Lang LaSalle India
The National Housing
Board (NHB) recently published its quarterly index data for the period April to
June 2013. The data for the top seven cities suggest an across-the-board fall
in residential property prices in the latest quarter ending June 2013, as
against a rise in price in the previous quarter (January - March 2013).
With the latest data
getting wide media attention, the question in the minds of many individuals who
intend to buy a first or second home this festive season is – are prices
beginning to correct?
Should one defer
purchase decisions and potentially benefit from lower rates few months down the
line?
 |
| Mr. Om Ahuja, JLL India |
Various channels have
interpreted this data as early signals of a broad-based price correction. The
fact is that while residential inventory seems to have indeed piled over the
last few years, prices continue to remain high in major metro cities.
This is also
corroborated by the NHB Residex city indices, which suggests that the fall in
prices in the most recent quarter has been largely a phenomenon limited to
smaller cities like Kolkata, Chennai and Hyderabad, rather than big metros. The
data certainly does not signal an imminent price correction across the board.
Yet another belief
being entertained on various fronts is that a certain section of developers /
promoters, given the current levels of inventory and industry slackness, will
be forced to reduce prices considerably. While inventory pile-up is certainly a
reality, the real question is whether this is sufficient cause for developers
to offer considerable discounts to individual buyers.
Overall unsold
inventory in cities such as Mumbai is high (as per JLL REIS data, Greater
Mumbai has close to 48 months unsold inventory as against an acceptable level
of 15 months).
However, a major part
of this unsold inventory lies in the Island City, which was never affordable to
small individual buyers. On the other hand, in the comparatively more
affordable suburban locations, vacancy is relatively lower and prices have not
corrected as expected.
They have, in fact,
remained stable or / risen. Therefore, if anyone benefits from this current
scenario, it is either bulk-buying institutions or HNIs or / NRIs.
In a depressed economy where
cash-conservativeness is the watchword, it could be a natural tendency to
postpone a major financial commitment like buying a house. Often, individuals
are tempted to time the market in an attempt to buy cheap, on the basis of
interpretations that do not reflect ground realities.
It is pertinent to
note that, in a growing economy, property always appreciates over the long
term. It never does a complete about-turn to march in the opposite direction,
though it could occasionally deviate from ‘learned’ market predictions.
Such deviations are
not necessarily corrections in the commonly understood sense of the term – they
could be minor course alterations that any market must undergo in order to adapt
and stay dynamic.
Those who intend to
buy residential property during the festive season out of personal / or traditional reasons are likely tend to
proceed with their purchases. For the rest, the question would be whether one
should attempt to time the market.
We believe this
question is more apt for an investor who has the potential to wait, watch and
put his financial muscle to test. Individual end users, on the other hand, will
need to establish whether the financial pain of an identified residential
project is sufficient reason for him to mark down the pricing of units and
thereby send out signals of a price correction into the market.
That said, actual
cash discounts are definitely not out of question. Buyers with cheque books and
/ or pre-approved housing loans in hand are certainly in a position to bargain
for a better price. However, caution must be maintained before assuming
complete slackness of sales at the developer’s end. As already mentioned, no
developer will confirm such a state of affairs and risk sending out distress
signals to other potential customers. Demonstrable earnestness of interest in
the project, backed by ability to make a down-payment, is the best position
from where to pitch for a discount.
Also, while certain
new projects in a location may have been launched at slightly lower rates, they
could be at planned or under-construction stage. Ready-to-move-in properties in
the same location will not display the same pricing, as demand for ready units
is always the highest.
About the author
Mr. Om Ahuja, CEO –
Residential Services, Jones Lang LaSalle India
For Media Contact..
Arun Chitnis
Head – Corporate
Communications & Media Relations
Jones Lang LaSalle
India
Level 6, Amar Avinash
Corporate Plaza, Bund Garden Road,
Pune - 411001.
Tel: 020 30930441
Fax: (020) 40196101
Mob: +91 9657129999
Website:
www.joneslanglasalle.co.in
Blog:
www.joneslanglasalleblog.com/realestatecompass
No comments:
Post a Comment