To See 6% Price Appreciation In 2015
Mr. Ramesh Nair, ,JLL India
Don’t expect
a major appreciation on your property in the next two years;returns on
property likely only from the third year
Given that
average property prices across
Mumbai have plateaued and sales remain sluggish, many home buyers are
speculating if a correction will take place in 2015. These fence-sitters are
watching the market movements keenly and delaying their buying decisions. Many
others are simply unable to afford sky high prices in the city and are moving
to suburbs or budget locations in the peripheral areas.
Even if an
end-user were to buy a house today,
she should not expect a major appreciation on the value of their property in
the next two years. Only from the third year can they expect annualized returns
of 10%. This is because average prices in the city grew only 7% in 2014 and are
expected to grow around 6% by the end of 2015. This is meagre growth and if we
compare it to the rate of inflation, the growth would become really marginal.
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| Ramesh Nair, JLL India |
Buyers’
market...!
Builders are
seeing an increase in the number of enquiries and expect the industry to see
recovery in the months ahead. They are also doing their part to improve sales
by offering discounts, freebies, waivers, festive offers and attractive schemes
to entice buyers. In some areas, they are offering spot discounts of up to 10%
on the base price of a property to buyers keen on making purchases. In other
cases, buyers can negotiate the floor rise charges or get these waived off
completely.
If you are
one of those buyers, who are not in a hurry to move into a new house, you could
book in the pre-launch stage of a project and get very competitive prices. For
example, booking in a pre-launch project in south Mumbai can help you get a
discount of about 8-10% easily. In one of the eastern suburbs, a pre-launch
project is offering a price of around Rs8,000 per square feet (psf) whereas a
completed project nearby is charging Rs 14,000 psf.
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| For Larger Image click the Image |
Stages of
sales process in past four years in India
Source: JLL India Research
Several
schemes are also being offered, especially in pre-launch projects. These include the popular
ones like 20:80, 30:70, 10:80:10 and 5:80:15. Such schemes remain popular with
many buyers although they have to pay higher base prices as compared to buyers
who opt to pay a large chunk of the capital value right at the outset.
For example,
the price could be Rs 12,000 psf in a project for buyers opting to make use of
such schemes vis-Ã -vis Rs 10,000 for buyers going for construction-linked
payment plans. In the same project, buyers paying the entire, or a large,
amount of the total capital value upfront could get a price of Rs 8,500-9,000
psf.
The reason
why these schemes continue to remain popular are two-fold: It becomes easier
for developers to attract customers and cover the interest payments the latter
have to pay to the banks; buyers only pay a small percentage of the total
amount and get a relatively risk-free investment opportunity.
Given the
benefits, it seems like a good time for buyers to finalize properties. If a
project meets your parameters, then you should go ahead and buy your dream house.
Special
deals for investors
Developers
have traditionally tried to attract high net individuals (HNIs). However, the
latter are advised to be careful of the terms and conditions before going for
such exclusive investment opportunities as these come with certain minimum
requirements like a lock-in period ranging from 18 to 36 months; minimum area
to be purchased ranging from 10,000 to 15,000 square feet and a 50%
down-payment.
Not all
investors would like to block such a big amount in a single project. There
would be some HNIs, who would like to invest smaller amounts in real estate projects.
They can book in pre-launch projects and sell off after the construction is
complete, or immediately after taking possession, and get a good appreciation
on their investment.
At the same time, since they would pay a lumpsum amount at
the time of booking, they can get additional discount in the range of 8-10%.
Promising
locations..!
If you are
interested in peripheral areas that would give a better price appreciation than
established locations, you can look at Ulwe, Kamothe, Karanjade and Dronagiri
in Navi Mumbai.
These areas could see moderate growth in the coming years
thanks to the upcoming international airport in Navi Mumbai and increased
connectivity to Mumbai through the upcoming Mumbai Trans Harbour Link (MTHL).
The reason
for a moderate appreciation is because these locations have already seen a good
growth rate in the past, soon after the airport project was first announced.
Sewree is another area in Mumbai, which could see moderate appreciation thanks
to the MTHL. Parel, Chembur, Kanjurmarg and Powai could see appreciation
primarily on account of excellent connectivity and end-user demand.
Other
peripheral areas like Vasai-Virar, Boisar, Dahanu and Palghar could also see
growth thanks to the upcoming bullet train project connecting Mumbai and
Ahmedabad. Virar could benefit due to the upcoming Virar-Alibaug multi-modal
corridor and the proposed elevated rail corridor connecting it to Churchgate.
Another important project that could lift up property prices in Vasai and Virar
is the proposed Delhi-Mumbai Industrial Corridor (DMIC). Peripheral areas offer affordable housing, which is end-user driven
and is less prone to speculation.
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