HOPE AND AP­PRE­HEN­SION

While the in­vestor and de­vel­oper are ex­pect­ing the value of realty as­sets to in­crease with a mar­ket turn­around, the end-user is be­gin­ning to feel more ap­pre­hen­sive, says Mu­niesh­wer A Sa­gar

Hindustan Times (Chandigarh) - Estates - - FRONT PAGE - mu­niesh­wer.sa­gar@hin­dus­tan­times.com

The slow­down in the realty mar­ket is not com­pletely over, with trad­ing vol­umes and prices largely stag­nant. How­ever, most realty stake­hold­ers are ex­pect­ing a mar­ket turn­around in the short to medium term. The change of govern­ment at the Cen­tre with a strong man­date has fu­elled these hopes and im­proved sub­dued mar­ket sen­ti­ment.

There are strong in­di­ca­tors that these hopes are in­flu­enc­ing stake­holder be­hav­iour. While buyer ac­tiv­ity has in­creased, an in­creas­ing num­ber of property own­ers are post­pon­ing sales. Un­like few months ago, now sell­ers are re­fus­ing price cuts and tak­ing stiffer po­si­tions dur­ing price ne­go­ti­a­tions. “Ear­lier, the buyer had an up­per hand in terms of price ne­go­ti­a­tions. Now, it is the seller. More and more people are agree­ing to buy at the cur­rent price lev­els. How­ever, property own­ers are re­fus­ing to sell. They ex­pect more value for their property at least in the course of the next few months,” says Ramesh Negi, a lo­cal real es­tate ex­pert. De­vel­op­ers too have ei­ther started launch­ing new projects, or are in the process of of­fer­ing new projects. Their plans are solely based on the as­sump­tion that pos­i­tive realty growth can be ex­pected in the near fu­ture.

Con­flict­ing in­ter­ests

The in­ter­ests of the en­duser, and most other realty stake­hold­ers such as de­vel­op­ers, in­vestors and raw ma­te­rial sup­pli­ers, are in con­flict. For the de­vel­oper and the in­vestor to sur­vive and grow, the slow­down has to be­come a thing of the past. While profit mar­gins and ex­pan­sion ca­pac­ity have been de­clin­ing for de­vel­op­ers the in­vestors are fac­ing a fi­nan­cial cri­sis. They feel that, un­less the mar­ket re­vives they will not be able to make an exit and con­se­quently in­cur losses on their cur­rent in­vest­ments.

Nee­dles to say if prices of real es­tate in­crease, the end -user will not be in a po­si­tion of ad­van­tage. Prop­er­ties in the af­ford­able cat­e­gory are likely to be lo­cated in the out­skirts of the tric­ity. More­over, these ar­eas also are likely to be of in­fe­rior qual­ity, say lo­cal realty ex­perts. For in­stance, if a buyer moves from Chandigarh to the pe­riph­ery town of Dera Bassi then he can ex­pect to cut his hous­ing ex­pen­di­ture by at least one-third. How­ever, he has to com­pro­mise in terms of the daily com­forts and needs. The in­fra­struc­ture of such pe­riph­ery ar­eas can­not be com­pared to the city. There is se­vere wa­ter and elec­tric­ity prob­lems and roads are al­most nonex­is­tent. Also, the schools and hos­pi­tals in such ar­eas are of in­fe­rior stan­dard.

Shift in ne­go­ti­a­tion trends

In the last cou­ple of years, the po­si­tion of the end-user had im­proved (when com­pared to the other stake­hold­ers like de­vel­op­ers and in­vestors) in terms of price ne­go­ti­a­tions. “The en­duser was the pri­mary buyer in the mar­ket and was leading price ne­go­ti­a­tions, which re­sulted in price cor­rec­tions across the re­gion. Over­all, the qual­ity of hous­ing prod­ucts had sub­stan­tially im­proved and even the budget hous­ing seg­ment had started to in­cor­po­rate fea­tures from the lux­ury seg­ment. And this was not all. De­vel­op­ers were of­fer­ing spe­cial re­bates, in­no­va­tive home fi­nanc­ing schemes and free­bies tar­get­ing the en­duser. The end-user ben­e­fits will come to an end now, with the de­vel­oper and big­ger in­vestors rul­ing price ne­go­ti­a­tions,” says Hi­man­shu Sharma, a lo­cal real es­tate ex­pert and a prospec­tive in­vestor.

Dis­tant dream

While the cap­i­tal val­ues of the hous­ing sec­tor have un­der­gone cor­rec­tion and stag­na­tion, the rental val­ues have con­sis­tently in­creased. To­day rentals are at an all-time high in the tric­ity re­gion. “This has trans­lated to a chal­leng­ing sit­u­a­tion for most people es­pe­cially be­cause in­come lev­els have not kept pace. The rental bur­den is forc­ing people to ei­ther move to the out­skirts of the city or the pe­riph­ery,” says Pradeep Pathak, a lo­cal en­tre­pre­neur liv­ing in a rented house in Zi­rakpur. How­ever, people who were con­tend­ing with the bur­den of high rentals had one clear hope dur­ing the slow­down- the hope of own­ing a house. In other words the price cor­rec­tions had spelt hope to most end-users. The end-user had re­placed the in­vestor as the pri­mary buyer in the mar­ket and was hop­ing that the prices would con­tinue to cor­rect. “Iron­i­cally, even af­ter two years of slow­down, most of the avail­able hous­ing sup­ply was not in the budget seg­ment. So, now, if home prices start to ap­pre­ci­ate again and in­vestor de­mand picks up the end-user is go­ing to be in a tough sit­u­a­tion. His prob­lems will be com­pounded if the home loan rates are not re­duced. Most prospec­tive en­dusers are ten­ants and they can­not af­ford to high rentals and re­pay loan in­stall­ments at the same time,” says Pathak.

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