Dry festive season for realtors, a bonanza for home buyers

Nowadays, the arrival of the festive season is announced by numerous advertisements by e-commerce players.
There was a time, not so long ago, when this was a zone occupied primarily by real estate developers. The main reason behind this change is a massive pile-up of unsold real estate inventory and home buyers refraining from purchasing stuck projects (projects which haven’t taken off).

As a result, developers are now busy completing existing projects and offering possession to customers this festive season. Industry experts say that the stress in the market over the last two years has resulted into a cleansing, especially in the National Capital Region (NCR).

While home-buyers are focussing on buying into projects that are either complete or nearing completion, the development has also led to shrinkage in the artificially created price gaps between that quoted by the developers in the primary market and those that exist in the resale/secondary market.

The situation has also created an opportunity for home-buyers in which they can find a good bargain. While there were several schemes already on offer, developers are looking to sweeten them further.

The maturing of the markets has also played a role. Experts say that as markets mature, home-buyers look at buying into projects that are under construction or are ready for possession. This is largely the case with markets such as Mumbai and Bengaluru.

Noida, which was a developing market and witnessed sharp rise in the number of new projects in a matter of five years is also maturing and while developers managed to sell almost 70-80 per cent of the project at the time of pre-launch, a few years back, the situation has changed significantly now. Home-buyers are only looking at projects that are near completion or the one that the developer is offering possession-on.

It would be a wise decision for them to take advantage of the softening prices and go for a hard bargain.

The slowdown has changed a lot of things. Till a year or two back, a large part of a project in and around Noida was sold by the developer at the pre-launch stage. These developers would keep a big premium between the price of their project sold in the primary market and those that existed in the resale market. For example, if a project in an area is was getting sold in the market at Rs 4,000 per sq ft, the developer would quote the price in the same project at over Rs 5,000 per sq ft in the primary market, thereby keeping a premium of around 25 per cent.

“The decline in new project launches and pick-up in resale market is resulting into a fall in the premium charged by developers in the primary market in Noida. Ideally, the premium charged by developers should only be around 5-10 per cent, however, the developers in Noida were charging a premium of up to 30-40 per cent,” said Ankit Kansal, MD and co-founder, 360 Realtors, a real estate advisory firm.

But resale market in Noida comes with a rider — the big transfer charge to be paid to the Noida Authority which is over and above — and sources suggest, several times over: the stamp duty. Depending upon the sectors, transfer charges vary from anywhere from Rs 700 per sq mt to Rs 1,980 per sq mt. An individual, who recently bought a house in Sector 93 in Noida said, “The transfer charges on the flat I purchased in secondary sale was more than the stamp duty on the property.”

Additionally, while new launches are absent from the market, developers are even offering special schemes for customers in the festive season to sell units in the ongoing projects. There are a number of lucrative schemes, along with subvention schemes — where developers are offering home buyers to pay EMI only after possession.

In its festive offer, Supertech has proposed to pay the first 9 EMIs for customers booking in any of the projects of the company during the 9 days of Navratras.

Even Wave Infratech is offering a Tanishq gift voucher worth Rs 1 lakh on every booking of either a residential or commercial property at Wave City Centre. At its Wave City, it is offering a gift voucher worth a maximum of Rs 41,000 on every booking.

What should you buy

While prices are stable and unsold inventory remains high, the market is good for buyers both in the number of choices of the property and also in terms of bargains.

A real estate consultant said that serious buyers can get good bargains in the market. “While developers do not like to cut down on the price significantly as it impacts their name, they are offering various freebies such as — free parking, free-club membership. This brings the effective cost of the flat down for the buyer,” said the consultant.

But it is not a market for investors as they can’t expect the price of the house to double in the time span within which it did, in the period between 2002 and 2010.

“While it is a market for end users, investors must enter only with a long-term horizon as the inventory levels remain high and it may take some time before the prices go up,” said Kansal.

Experts say that investors should also look to go with a credible developer at this time as they not only have the money power to complete the project and deliver on time but also since they would not impose unreasonable, undisclosed charges at the time of possession.

Market credential is important while getting into a project of a developer as an individual can assess his track record along with his financial strength. Entry of players such as Tata, Godrej and Mahindra, among others, in the realty space has only improved the options for home-buyers.

Experts say that buyers must also verify whether a developer has defaulted on loan payments to banks or other financial institutions, both in a corporate and in an individual capacity. It is also important to note the past record of the developer in terms of his tendency to meet regulations. If the developer has flouted norms in the past while developing the project, home-buyers should avoid entering such a project.

Source : ENS Economic Bureau