Opportunity for homebuyers

A slow market is a boon for end-users, if you make sensible use of developers' predicament and price trends

For some time, home loan rates have been inching downwards but property buyers haven't still warmed up to a plunge. Experts say fence-sitters are waiting for more rate cuts and even a fall in property prices. Lack of confidence in servicing of loans because of a slowing economy has also resulted in slow sales.

Yet, such times also throw up good opportunities. A quick survey of five top cities - Delhi/National Capital Region, Mumbai Metropolitan Region, Chennai, Bengaluru and Pune - present different pictures. While NCR and Chennai have been hit hard, the markets of Mumbai and Bengaluru show marginal growth. Pune has just begun to slow down.

One reason for the stagnation in demand is high prices or, as Pankaj Kapoor, managing director at Liases Foras, a real estate research agency, says, speculative prices. "Though a country of housing shortages, the current price levels are so speculative that there is low demand and rising inventory in several cities," he says.

Product mismatch is a second key cause. Apart from Bengaluru and Pune, in the others, developers came up with high-end apartments. "Ticket sizes were beyond what the market could absorb," says Ashutosh Limaye, head-research, JLL India.

Oversupply is a third factor. In areas where land and infrastructure were both available, such as the NCR, many new developers entered, due to which supply far exceeded demand.

Both the NCR and Mumbai markets were dominated by investors until last year. "When end-users dominate the market and there is product mismatch, developers get the signal very quickly, as sales don't happen. But, when investors dominate, they keep buying even if the product is inappropriate, as prices are rising. Then, one day, they stop buying, too, but for developers, the signal comes too late," says Limaye.

In such circumstances, there is a good chance of getting bargains. "Developers are today willing to negotiate with you and offer price discounts, which they wouldn't if market conditions were better," says A S Sivaramakrishnan, head of residential services-India, CBRE South Asia. Depending on the severity of slump in your market and size of the project, you could come away with a discount of seven to 15 per cent.

Changing strategies

Developers are now coming up with more compact-sized apartments that younger buyers can afford. They are also launching smaller-sized projects with only about 100 units, instead of large township-type developments, to ensure timely completion.

The distress in real estate markets has forced developers to come up with payment plans that are favourable to buyers. These subvention schemes allow you to pay only 20-30 per cent of the cost at the time of booking and the rest on delivery. Make the most of these. "These payment plans translate into a discount of eight to 10 per cent for the buyer," says Sivaramakrishnan.

It is safer to opt for completed projects or those that will be completed soon. Project delays constitute the biggest risk in a slow market. If you decide to buy in a newly launched project, opt for a reputed developer, even if you have to pay a premium, as the likelihood of delays is lower.

Checks

Buyers should also carry out all the checks, such as ensuring the title is clear and all the needed permissions have been had. Pay heed to the project's fundamentals. The location should be attractive and the price reasonable. The developer should have a sound record in delivering projects on time and offering all that was promised at booking. "Make sure over a 15-day or one-month period that the project is making sound progress," advises Sivaramakrishnan.
NCR, CHENNAI SLUMP, BENGALURU AND MUMBAI FARE BETTER

• National Capital Region: Prices static for past 12 months. Significant unsold inventory. Noida worse than Gurgaon
• Mumbai Metropolitan Region: Single-digit price appreciation in 2015. Luxury segment struggling. Excess supply in Navi Mumbai
• Bengaluru: Sales up marginally in 2015. Single-digit price appreciation. Limited inventory
• Chennai: Both sales and prices are down in 2015. Considerable inventory. New launches have declined. Considerable price run-up between 2007 and 2013; infra development lagged
• Pune: Good run-up in three years. Stagnation visible in the past couple of months. Price growth now expected to taper