Go for a hard bargain as developers look to dispose unsold inventory

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Written by Sandeep Singh
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Published: October 18, 2014 12:09:31 am


With developers looking for ways to sell-off their projects experts say that home buyers are getting discounts or freebies to the tune of anywhere between 10-15 per cent and if they bargain hard they can get a sweeter deal.

Defying expectations, the festive season this year has failed to evoke the desired demand in the residential housing space and the industry continues to face issues of oversupply, high unsold inventory and a decline in prices. The quarterly House Price Index (HPI) for last four years compiled by the Reserve Bank of India for ten major cities based on actual registered transactions shows a decline in growth rate of housing price rise in the financial year ended March 2014 as a result of weakening demand. The data however shows that the decline has not been uniform across categories. If the high-end and the luxury housing segment saw the housing price rise by around 20 per cent in 2013-14, the growth in the small house segment narrowed to 2.9 per cent in the quarter ended March 2014. Rising inventory and softening real estate prices however, open up an opportunity for the prospective home buyers to go for a good bargain in the housing market according to market experts.

The price and demand trend

The HPI index prepared by RBI shows that in the two-year period between April 2011 and March 2013 it was the small house category that led to the price rise. While the absolute price rise for the small housing segment during that period stood at 74 per cent, that for the medium and large segment rose by 50 and 41 per cent respectively. The prices however stabilised in the small segment as they rose by only 3 per cent in 2013-14 as against a 10 per cent and 19 per cent rise in the medium and the large segments. While the developers held on to high prices till 2013, that seems to be now crumbling under pressure from low demand and rising inventory.

A report released by Knight Frank shows that new launches in the first half of 2014 dropped by 32 per cent over that of H1 2013 and the sales volume in that period dropped 27 per cent. The report pointed out that the unsold inventory for the Mumbai Metropolitan Region and the National Capital Region at the end of June 2014 stood at 2,13,742 units and 1,67,000 units respectively.

Anshuman Magazine, CMD, CB Richard Ellis said that the housing demand across leading cities remained subdued in the first half of this calendar on account of ruling high prices even as developers started to offer discounts to boost sales ahead of the festive season.

Pointing out that several developers came out to launch their projects ahead of the festive season, a recent report released by Assocham said that this has led to a rise in the existing inventory by 6.7 per cent and it will be a tough task for the developers to sell during this festive season as the demand remains weak.

“The number of unsold units rose 6.7 per cent quarter-on-quarter (QoQ) because of the large number of new launches amid a prolonged slump in sales. New launches increased by approximately 30 per cent QoQ in Q1, 2014-15,” said the report prepared by ASSOCHAM and JLL.

Outlook

There are expectations that demand may pick up going forward but a high unsold inventory suggests that the prices will remain under pressure especially in the projects in the small and medium segment that have been priced high.

While price correction is also expected in housing units across various parts the country, experts feel that there may be some segments that may see some price rise too, especially the projects that are nearing completion.

“Owing to strong demand for ready-to-move-in properties across all leading cities, prices are likely to move up for residential projects that are inching towards completion. The mid-end and affordable housing segments are expected to witness healthy capital appreciation in the short term. In view of the significant inventory of housing units spanning the leading cities of the country, there is need for a price correction to aid the average Indian home buyer in taking a purchase decision,” said Magazine.

Opportunity for buyers, go for A good bargain

With developers looking for ways to sell-off their projects experts say that home buyers are getting discounts or freebies to the tune of anywhere between 10-15 per cent and if they bargain hard they can get a sweeter deal. “It is a good time for investors as they can get good deals. Since the deals are going to be around for some time home buyers can do a proper search and go for a good developer offering a good deal,” said Sandeep S Katiyar, CEO, Century 21, a global real estate franchise sales organisation. As the scenario is not looking too bright for real estate players even in the festive season, they are looking to keep things going by offering huge discounts.

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https://indianexpress.com/article/business/business-others/go-for-a-hard-bargain-as-developers-look-to-dispose-unsold-inventory/

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