Buyers still wait for prices to dip

Buyers still wait for prices to dip
The Hindu Business Line, May 3, 2009, Page 15

S. Shanker

Yet another property expo in Mumbai was organised by the 400-strong Maharashtra Chamber of Housing Industry in the second week of April.

An overwhelming response satiated the organisers, who said 77,752 visitors flocked to the exhibition this year as against 66,784 in October 2008. On the surface it did appear that many buyers preferred to merely touch base to know what the current offerings were rather than take a purchase call. However, MCHI president, Mr Pravin Doshi, felt it was thumbs up from home buyers, especially from the first time home-seeker who appeared convinced it was the right time to buy, after waiting it out for long.

However, experts and analysts appear a little less convinced, though they do agree that developers have seen some numbers on their sales charts in the last four months.

Researchers at Centrum feel prices in Mumbai still remain unaffordable. Compared to the NCR (NYSE:NCR) , Bangalore and Chennai markets which have seen prices drop 30-40 per cent, property prices in Mumbai had fallen only by 15-20 per cent, they contend, while pointing to concerns over completion of projects.

They say about 75 per cent of the projects on offer at the exhibition were the same that were showcased at the October 2008 Property Expo, which points to little or no off-take in residential volumes in Mumbai between October 2008 and March 2009.

With 57 per cent projects on display slotted for completion after March 2010, apprehensions on delivery hamper conversion of enquiries to actual transactions.

Buyer poll

A buyer poll conducted by Centrum indicates that a majority of buyers were for a further 20 per cent cut in prices and would take a call only after six months, keeping in mind fears of job losses and salary cuts.

Mr Kumar Gera, Chairman, Confederation of Real Estate Developers Association of India, says the term affordable is a misnomer and cannot be used merely to identify projects without frills. Projects that do not have swimming pools, landscaping and club houses should not be categorised as affordable on the price count alone.

Affordability is what a buyer can afford, which should be estimated at about 50 per cent of his combined family income. It varies from buyer to buyer and city to city. A Rs 20-lakh apartment in Mumbai and a Rs 20-lakh home in a tier III city are not the same, he says.

There are early signs of recovery though the going is slow. A full scale turnaround in real estate could happen only when the economy revives and there was little chance of prices going up till then. In the meanwhile, demand was expected to accumulate as supplies dwindle due to the lull in the market.

Mr Gera says prices have come down significantly and buyers could take the plunge now. A 5-10 per cent drop could happen in some pockets, but then real estate investment should be looked over a 10-year horizon, when considerable appreciation can be netted.

VISIBLE TRENDS

Motilal Oswal researchers too feel buyers are holding back, awaiting a further correction in prices, despite many developers across Mumbai reducing prices by 10-30 per cent and being open to price negotiations during the last 4-5 months.

The researchers say they expect most developers to increasingly focus on the affordable housing going forward.

Visible trends at the expo they felt were a huge pent-up demand for affordable housing as also a higher interest in city-centric properties.

Suburban Thane has seen several launches in the last three months, with developers such as Dosti, Hiranandani, Kalpataru, Lodha and Acme in the lead with a fair degree of success.