Price correction is the norm in Karnal land segment
DEMAND CRUNCH The land segment in the real estate market struggles here with low demand and subdued prices
CHANDIGARH: The land segment in the Karnal real estate market has failed to deliver attractive returns on investments as price growth in the segment remained subdued in the last five years.
The city, located midway between state capital Chandigarh and the national capital Delhi, is a major hub for trading of agriculture produce.
Traditionally, investments to the land segment followed from the surpluses generated in the agriculture trading and local industry. Land for realty projects also contributed to demand in the segment.
In the last five years, however, demand from all these segments consistently declined, pulling down prices in the land segment in and around the city.
HIGH AND LOWS
The real estate sector in the city follows the general trend in the region’s realty market. From 2003-2006, land prices registered an upswing as builder demand for land peaked.
“Between 2003 and 2006, the end-user demand drove the demand in the segment. There were a number of new township projects launched in the city. Both local and national-level builders entered the market pushing up demand for land. As builders rushed in to create their footprint in the city and make most of the booming local market conditions, nearly 1,000 acres of agriculture land around the city came under new realty projects,” says Rajveer Malik, 48, a local real estate consultant.
Several residential and commercial realty projects were launched including, Chd City Karnal; Alpha International City, Narsi Village; Ansal Housing’s Ansal Town, Ansal API and Landmark’s Sushant Royale.
In the residential segment, the project created supply of plots of 150, 360, 500, 750 and 970 sq yards. Land prices rose sharply during this period.
In some locations, particularly, on and near the National Highway number 1, prices nearly doubled. These developers mainly created supply on the NH-1 in sectors including 27, 28, 32 etc.
The Haryana Urban Development Authority (HUDA) also created new sectors
THE RATE OF PRICE CORRECTIONS IS RELATIVELY LOWER IN THE LAND SEGMENT THAN IN OTHER REALTY SEGMENTS
After a couple of years of price and demand stability, there was again a revival in the market between 2009 and 2011. Unlike the previous sharp growth years where the enduser dominated the demand, during this period, the investor became more dominant.
“It was a speculation-driven market wherein the investor bought land expecting it to sell to the builder at a premium. Some investors succeeded in this enterprise as builders looked to expand their land banks. But, for most the enduser demand never materialised,” says 52-year-old Ashwini Taneja, a local real estate consultant.
Since 2012, like most other realty segments, the land segment has also registered slowdown. Both the end-user and the investor demand declined sharply as both the builders and the investors couldn’t attract enough demand.
“It is one of the longest slowdown in the city’s realty market. With the economic slowdown in the country, the surplus from the trading community, that traditionally ended up in the land segment, stopped. Also, builders struggling with low demand and a situation of oversupply were in no position to build on their land banks. The market situation hasn’t changed much in the last couple of years. Average price in the segment ranges from ₹25 lakh per acre in the interior areas to ₹4 crore per acre on the national highway,” says Taneja.
RATE OF PRICE CORRECTIONS RELATIVELY LOW
Price corrections are the norm in the segment like in the residential and commercial segments.
The rate of price corrections is relatively lower in the land segment than in other realty segments.
“It is a question of holding capacity. In the residential and commercial segments, particularly, in the new projects, the builder has to generate funds by selling his products. The unsold inventory with the builder has consistently increased in the last six years and there is no home buyer. So, the builder is under tremendous pressure to cut on prices and attract the buyer. This has lead to sharper price corrections in the residential and commercial segments. In the land segment, the seller, generally, is in no rush to exit his property. He has alternative sources of income generation, agriculture in particular. If he gets an attractive price quote for his property, he opens to a sale, otherwise he is adopting a wait and watch approach,” says Malik.
ENTER OR EXIT
Price correction in the segment is an attraction for buyers to enter the segment. But, low prospects for exits at an attractive investment return is discouraging the investor from the entering the segment.
“We don’t expect price to decline further, instead, price stability should be the norm. Even though there are more investors trying to exit the market, yet sharper price corrections aren’t expected as desperate selling days are long over,” says Taneja.
Realty experts suggest the best option in the current market conditions is to wait and watch till the market recovery takes a strong ground in the segment and the realty market