Poor Buyer Sentiment Continues To Hurt India’s Under-Performing Realty

Amid a slowdown in demand, prices have depreciated to reach reasonable limits in India’ prime property markets. PropTiger.com data show that rates have largely remained unchanged in the country’s key markets, barring some exceptions. Those using housing finance couldn’t be happier since the repo rate now stands at almost a decade-low level. At 5.15 per cent, the key rate stands at its lowest rate since March 2010. Consequently, banks have brought down home loan interest rates to eight per cent now.  Those having an impressive creditworthiness could in fact borrow money at 7.90 per cent interest, too.

Property purchase costs would certainly reduce further if one is investing in affordable property-units priced at Rs 45 lakh or below. In this year’s budget, the government has increased the tax deduction limit on the interest paid on purchase of such properties to Rs 3.50 lakh from the earlier Rs 2 lakh. If they acted pricey in the past, India’s developers are finding their new 'situation'  quite humbling as unsold stock volumes continue to rise. PropTiger.com data show over eight lakh housing units lay unsold in the country’s nine major property markets till July 2019. This inventory is causing a major headache for liquidity-hit builders, considering they also have to deal with an added tax burden if they fail to sell it off within a specified period.  

Buyers today are in a better position to afford a property than they were earlier, with plenty of options to choose from in the market and also get a good bargain. Despite all that, home sales numbers continue to be dismal. PropTiger.com data shows home sales in nine major markets declined by 11 per cent in Q1FY20.

Lack of buyer interest

Researches done in the past reflect that the animal spirit among the buyers has more to do with growth of property markets in a county than most other factors that impact its performance. Now, irrespective of the many government efforts to boost that spirits, buyers have shown little inclination to restore their trust in India’s property market, where their preferences have been known to lie historically. According to a survey by industry body NAREDCO in August 2019, buyer sentiment continues to be dismal amid a deepening NBFC crisis, rising cases of builder insolvency and project delays. As one builder after another is being dragged to insolvency courts and as the number of crumbling banks that have major exposure to real estate is seen growing, buyers seem to be ignoring the price benefits that could be afforded by them due to the ongoing crisis.

 

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How To Turn Realty’s Negativity In Your Favour

The optimists might like to differ, but, there is no denying India’s real estate sector is still far from dispelling the negativity shrouding it all around. Game-changing laws are in play, but the impact they were expected to have made remains evasive so far. In fact, larger number of property-related frauds is coming out in the open after the launch of the real estate law, corroding buyers’ sentiment. If one planned to complete one’s property purchase this year, one is compelled to put ones plan on hold and wait for longer to see what comes out of the grand play taking place in today’s realty. That may not be the best thing to do, though. A time like this, in fact, presents to you an opportunity to strike a great deal, if you do it the right way.

Today, sellers are willing to negotiate and be reasonable with you. They are not going to have that conceit in their tones which you might have noticed while engaging with them earlier. There is no dearth of options if you make up your mind on buying a property. The subdued demand has turned many a newly built homes into inventory. So far, rates of interest on home loans are also reasonably low, and banks, too, are open to negotiation on so many fronts. As for brokers, they might be willing to negotiate on their cut on the deal – there are not many deals they are able to help make these days.

These unexpected things you could certainly expect from a market not doing so well.

However, let us see what not to expect when you are expecting to bag a good property deal.

It has been years that a slowdown has paralised the sector. People who had invested large amounts in property betting on its never-eroding growth are still in a state of shock. Property brokers would tell you how sellers are still living in a world when all was well with real estate and prices only moved upwards, trying to defy the reality. Genuine sellers would do that, to be sure, even if they are in a desperate need to offload the property and use the money for some other purpose. When one says this might be the most appropriate time to invest in property, don’t not expect to strike gold. Unbelievably cheap offers should only raise a red flag in your mind—that you are going to fall for a bad deal.