Pos­si­bil­ity of price cuts re­viv­ing buyer in­ter­est in high-end prop­er­ties

NOTE­BANDI TRENDS Queries in­creas­ing from par­ties buy­ing homes for own use and in­vestors seek­ing dis­counts

Hindustan Times (Chandigarh) - Estates - - FRONT PAGE - Van­dana Ram­nani van­dana.ram­nani@hin­dus­tan­times.com

In­vestors too are scout­ing the mar­ket pro­vided (slashed) prices are be­ing of­fered to them, (which is as much as 10% to 40%), de­pend­ing on whether they want to in­vest in res­i­den­tial, com­mer­cial or land prop­er­ties SHVETA JAIN, cush­man & wake­field

Some ac­tiv­ity at last is tak­ing place in Delhi’s pre­mium real es­tate mar­ket af­ter Novem­ber’s shock de­mon­eti­sa­tion an­nounce­ment. In­vestors and oth­ers look­ing for a home of their own are keen to take ad­van­tage of the dis­counts and re­duced prices likely to be of­fered by sell­ers des­per­ate to dis­pose of their prop­er­ties. Home buyers can ex­pect at least 10% to 20% to be shaved off prices that were pre­vail­ing in pre­mium ar­eas be­fore de­mon­eti­sa­tion.

Buyer and in­vestor queries have in­creased af­ter Novem­ber 8 and so have ex­pec­ta­tions with peo­ple hop­ing to lever­age the cur­rent mar­ket con­di­tions to get higher dis­counts, say real es­tate ex­perts.

“The end buyer is not dead. He is def­i­nitely in­ter­ested in pur­su­ing a deal un­til he gets the dis­count ex­pected by him. While trans­ac­tions have been fewer af­ter Novem­ber 8, site vis­its to projects are slowly pick­ing up as buyers are hope­ful of get­ting bet­ter dis­counts in the present mar­ket con­di­tions. In­vestors too are scout­ing the mar­ket pro­vided slashed prices are be­ing of­fered to them (which is as much as 10% to 40%) de­pend­ing on whether they want to in­vest in res­i­den­tial, com­mer­cial or land prop­er­ties,” says Shveta Jain of Cush­man & Wake­field.

There’s plenty of sup­ply avail­able in the sec­ondary mar­ket, es­pe­cially in Delhi’s prime mar­kets as many pri­vate de­vel­op­ers still hold­ing on to stock re­alise they may not be able to get any long-term value or the ben­e­fit of cap­i­tal ap­pre­ci­a­tion. This is forc­ing them to mon­e­tise their as­sets as they pre­fer liq­uid­ity at this point in time.

“In­vestors and builders hold­ing prop­er­ties are look­ing at mon­etis­ing their as­sets and re­de­ploy­ing the pro­ceeds in rental yield­ing as­sets. As for the buyers, there is more choice avail­able for them and the present de­mon­eti­sa­tion drive has ac­tu­ally trig­gered more ex­plo­ration. Buyers have started to step out and ex­plore the mar­ket hop­ing to strike a great bar­gain,” says Jain.

How­ever, some peo­ple are also de­fer­ring their prop­erty-buy­ing de­ci­sions. Even those who can af­ford to pay by cheque are hold­ing back be­cause they are un­sure of how their busi­nesses will per­form and pre­fer pre­serv­ing their cap­i­tal re­serves, she adds.

Some in­vestors and buyers have man­aged to rene­go­ti­ate the terms of deals en­tered into be­fore Novem­ber 8 and got bet­ter dis­counts, al­most in the range of 10% to 20%. This is be­cause most deals have been rene­go­ti­ated into all-white trans­ac­tions and the cash pay­ment in black over and above the price de­clared for the prop­erty has been re­duced dras­ti­cally.

Mean­while, real es­tate agents have said that be­fore de­mon­eti­sa­tion they were fi­nal­is­ing about 10 trans­ac­tions on an av­er­age but to­day the num­ber has come down to four to five, mostly white, trans­ac­tions.

South Delhi ar­eas which are seen as or­gan­ised mar­kets, where all-white deals are preva­lent, are Vas­ant Vi­har, Shan­tinike­tan and Pan­sheel En­clave. De­fence Colony and GK parts I and II are said to be un­or­gan­ised be­cause the cash to cheque ra­tio is about 60:40.

Sup­ply is lim­ited in or­gan­ised mar­kets. Out of 104 plots in an area such as West End, only about five to six apart­ments are likely to be on sale. Since op­tions are very few, cor­rec­tion is lim­ited to about 7% to 8%. In colonies where there is some el­e­ment of cash de­ployed, prop­er­ties are likely to be avail­able at a dis­count of over 20%, says Ro­hit Cho­pra of Sand Ad­vi­sory Pvt Ltd, who has seen many deals be­ing rene­go­ti­ated af­ter de­mon­eti­sa­tion.

To cite a few ex­am­ples, the price of a 300 sq yard prop­erty in GK 1 that was ear­lier avail­able for ` 7 crore was brought down to ` 5 crore and again to

` 4.5 crore af­ter rene­go­ti­a­tions. This has hap­pened be­cause the cash com­po­nent has come down dras­ti­cally. In De­fence Colony, an apart­ment be­ing sold for ` 8 crore was fi­nally dis­posed of for around ` 7 crore.

Most trans­ac­tions af­ter Novem­ber 8 have been rene­go­ti­ated into all-white deals and have seen cor­rec­tions of al­most 10% to 15% in prices as the cash com­po­nent has come down, says Cho­pra.

A deal in Vas­ant Vi­har that was al­most closed be­fore de­mon­eti­sa­tion took place had to be rene­go­ti­ated. The 450 sq yard prop­erty that was be­ing sold for

` 9 crore was fi­nally sold for ` 8.15 crore. Talks for the deal be­gan dur­ing Di­wali and were closed a few days ago at al­most a 10% dis­count. The buyers were look­ing for a 25% dis­count.

A 250 sq yard base­ment and ground floor unit in GK II which was a mixed pay­ment deal was closed for ` 4.05 crore as against

` 5 crore and was a full cheque deal.

A deal was fi­nalised in Jor Bagh re­cently for ` 19 crore as against ` 21 crore de­cided ear­lier. This had to be rene­go­ti­ated af­ter de­mon­eti­sa­tion into an all-white deal.

In an­other case, a buyer fi­nalised two deals in De­fence Colony. The first prop­erty that was to be bought at ` 7.5 crore was fi­nally ne­go­ti­ated at ` 6.75 crore and the sec­ond prop­erty for which the bud­get was around

` 5 crore is likely to be closed in Jan­uary 2017.

These mar­kets might not see any new sup­ply as most joint ven­tures that bun­ga­low own­ers en­ter into with builders are on hold. Among the few ex­cep­tions, a joint ven­ture deal was rene­go­ti­ated in Hauz Khas this week at a 15% dis­count as the owner was 80 years old and re­build­ing the house for his son. Un­sure about his fu­ture he had no choice but to of­fer a ` 15 lakh dis­count and go ahead with the deal.

Builders hold­ing on to their stock in these mar­kets or in­vestors look­ing for liq­uid­ity in­stead of block­ing cap­i­tal are mak­ing quick de­ci­sions. The trend seen is that most of these in­vestors are liq­ui­dat­ing their prop­er­ties in un­or­gan­ised mar­kets such as GK1 and GK II and buy­ing prop­er­ties in white/or­gan­ised mar­kets such as Vas­ant Vi­har – within 5 km of the area where they orig­i­nally held prop­er­ties.

An­other cat­e­gory of plot and apart­ment own­ers who were ear­lier think­ing of sell­ing prop­erty are now will­ing to wait and not give dis­counts as they have the fi­nan­cial ca­pac­ity to hold on.

Pankaj Kapoor of Li­ases Fo­ras says that the last quar­ter re­sults are not likely to in­di­cate a sharp de­cline in prop­erty sales as the festive season was over when de­mon­eti­sa­tion was an­nounced. Though, how­ever, peo­ple are in wait­ing mode, some are look­ing for op­por­tu­ni­ties in a dis­rup­tive mar­ket sce­nario and that can lead to a blip in high-end sales.

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