Year ends on positive note for housing sector
WHAT MATTERS Most changes are favourable for end-user with greater transparency, builder accountability, cheaper prices and loan rates, lesser competition from speculative investor
For the home buyer in the Chandigarh tricity, homes became cheaper and 2016 was a turbulent year for the housing sector. Chandigarh tricity comprises Chandigarh, Panchkula, SAS Nagar and the peripheral towns of Zirakpur, Dera Bassi, New Chandigarh or Mullanpur, and Kharar.
The realty slowdown continued in 2016 as the demand-supply mismatch led to unsold inventory piling up. The year witnessed more and more home buyers approaching consumer courts for getting compensation against erring builders. There were several cases of builders, particularly in the periphery, failing to deliver possession in time besides failing to ensure internal and external infrastructure.
On the positive side, developers in the periphery started redesigning their housing products in tune with the prevailing demand trends in the market, concentrated in the budget and affordable housing segments.
The central government notified the Chandigarh Real Estate (Regulation and Development) (General) Rules, 2016, under the Real Estate (Regulation and Development) Act, 2016. SAS Nagar and Panchkula are yet to get the rules under the Act as both Punjab and Haryana are yet to notify the rules. The Real Estate Regulatory Authority in all three areas are expected to be operational after April 2017.
Impact of note ban
Demonetisation of higher value notes impacted home prices, sales and demand as uncertainty prevailed in the tricity housing market.
Sanjay Arora, 42, a Chandigarh-based real estate consultant, says, “Demonetisation created a major disturbance in the local housing sector. The initial reaction was panic. Later, the housing market stakeholders adopted a wait and watch approach.”
Market sentiment, which was subdued for four years, further nosedived and home prices fell sharper. “The real estate market situation and trends will become clear in the coming months, particularly in the new financial year,” says Arora.
More supply, less demand
Large unsold inventory in the tricity, low demand and liquidity crunch for builders discouraged the launch of new projects. “In the public sector, government bodies such as the Chandigarh Housing Board (CHB) and Greater Mohali Area Development Authority (GMADA) added to supply creation. In the private sector, most of the supply creation that took place was in the periphery in the budget and affordable segments. Smaller built-up residential spaces came up in Kharar and Zirakpur. Most developers struggling to meet possession deadlines focused on the delivery in the already running projects,” says Balwinder Sandhu, 54, an SAS Nagar-based real estate consultant.
Like the past four years, the demand levels remained low both in the primary and secondary markets. Only the need-based end-user was active in the market, which failed to absorb the large base of unsold inventory or drive realty growth in the region.
“With poor buyer confidence in builders, only possessionready properties attracted the buyer’s attention. The active end-user was in the budgetaccommodation segment( Rs 15 lakh to Rs 35 lakh). Relatively small-sized properties were in demand, particularly in the periphery where builtup properties are available in this segment. But on the whole investors were absent from the market. The few active were exploring distress sale properties,” says Vikas Bhalla, 53, a Zirakpur-based real estate consultant.
The apartment segment, particularly in the mid-price and luxury segments, continued to lose appeal among buyers.
“Though prices in the apartment segment have fallen sharply yet there are issues that have come up recently to discourage buyers. For instance, in our search for a good apartment in the price range of Rs 40 lakh to Rs 45 lakh, there were few good options. We discovered maintenance problems were widespread, and the quality of construction was poor in most projects,” says Atul Kumar, 50, a Zirakpur-based prospective buyer, employed with a private sector insurance company.
An exception to the trend of low demand was Greater Mohali Area Development Authority’s IT City project. Floated this year, the scheme received good buyer response. Residential properties around airport road, particularly IT City and Aero City, received relatively better buyer response.
Prices on slide
For the fifth year, prices in the tricity and the periphery were on the decline.
In certain locations such as Chandigarh, there was a trend of stability with prices declining marginally by 5% to 10%.
In some places such as IT City and Aero City in SAS Nagar, price appreciation was reported. In most other locations, the general trend was of price correction.
“Both SAS Nagar and Panchkula recorded price corrections of 20%. In the periphery towns of Zirakpur, Kharar and Mullanpur, there were price corrections ranging from 10% to 25%, depending on the location,” says Bhalla.
Market dynamics changed with the announcement of demonetisation on November 8. With the cash component of realty deals missing, the prices, particularly in the secondary market, came under pressure.
The housing sector is all set for major changes in the New Year in terms of supply, demand and prices. Also, the setting up of the real estate regulatory body in the states and Union territories will bring in much-needed transparency.
The dependence of the housing sector on black money is also expected to end with demonetisation. “Demonetisation and the consequent cash rich banks are expected to lead to cheaper home loans. Banks have already started cutting interest rates. This is bound to push up demand in the sector,” says Arora.
New supply creation in the short and medium terms will be restricted with builders stipulated under the RERA Act to keep 70% of deposits from buyers in a separate account kept solely for the project.
Most of the changes that took place this year are favourable for the end-user – greater transparency, builder accountability, cheaper prices, home loan rates, and lesser competition from the speculative investor.
The price appreciations and demand in IT City and Aero City indicate that infrastructure development and safety net for buyers hold the key to boosting demand and prices.
PRICE APPRECIATION AND DEMAND IN SAS NAGAR’S IT CITY AND AERO CITY INDICATE INFRASTRUCTURE DEVELOPMENT, SAFETY NET FOR BUYERS HOLD KEY TO BOOSTING DEMAND AND PRICES