Should you in­vest now or wait?

Buy­ers should try and make the best of the cur­rent of­fers and dis­counts of­fered by de­vel­op­ers

HT Estates - - HTESTATES - Om Ahuja Jee­van Prakash Sharma

In the closed cir­cles of large in­vestors, we hear that that the rally of real es­tate as an as­set started in 2003 when coun­try’s GDP growth was hov­er­ing at 8% and in­fla­tion was at 5%. We also hear that in 2013, the trend re­versed as In­dia’s GDP growth hov­ered at around 5% and in­fla­tion reached 10%.

In such sce­nar­ios, in­formed in­vestors be­lieve that the price growth of phys­i­cal as­sets like com­modi­ties and real es­tate slows down. With high in­fla­tion eat­ing into the sav­ings of the com­mon man, avail­able bud­gets do not en­cour­age the tak­ing of long-term in­vest­ment calls. The mid­dle in­come seg­ment per­ceives that lim­ited fi­nances pro­hibit ex­po­sure to as­sets like gold and real es­tate.

Over­sup­ply – fact and fic­tion

Over the last few months, many re­search and me­dia re­ports have spo­ken of ex­ces­sive real es­tate sup­ply and slow­ing de­mand across many In­dian cities. In such an en­vi­ron­ment, de­vel­op­ers roll out dis­counts and ex­tras that are not part of the nor­mal of­fers. De­spite spo­radic in­ci­dences of such of­fers in some cities and lo­ca­tions, this trend is by no means a com­mon one; it is lim­ited to de­vel­op­ers who are strug­gling to at­tract de­mand. How­ever, mar­ket pun­dits con­tinue to pre­dict that it will catch up across the board very soon.

This has cre­ated an ex­pec­ta­tion that first few months of 2014 will see a cor­rec­tion in prop­erty prices from de­vel­op­ers across mar­kets and projects. The ob­vi­ous ques­tion that comes to the mind of hes­i­tant prop­erty buy­ers is whether they should hold their pur­chase de­ci­sions in abeyance in or­der to ben­e­fit from a price cor­rec­tion, or make the best out of the cur­rent of­fers and dis­counts.

Econ­omy – here comes the sun

With the ru­pee weak­en­ing, ex­ports-led sec­tors in In­dia will do ex­ceed­ingly well in 2014. The global econ­omy is look­ing up once again, and ex­port-cen­tric sec­tors like in­for­ma­tion tech­nol- ogy, au­to­mo­biles, tex­tiles, gar­ments, diamonds and jew­ellery will be the early ben­e­fi­cia­ries of this trend. Large cor­po­rate listed play­ers like TCS, In­fosys, Wipro and many other re­puted IT com­pa­nies are hir­ing more em­ploy­ees and plan­ning to pay bet­ter salaries in the next in­cre­ment cy­cle. This will lead to im­proved sen­ti­ments - and the stock mar­ket is al­ready re­flect­ing this mood.

More per­ti­nent to real es­tate is the fact that once the pos­i­tive sen­ti­ment gath­ers for­ward mo­men­tum, fence-sit­ters will rush to buy apart­ments. This will be a key trend to watch, es­pe­cially in cities that are di­rectly cater­ing to these sec­tors — specif­i­cally Chen­nai, Ban­ga­lore, Hy­der­abad, Pune and Gur­gaon.

Ev­i­dently, look­ing at the macro pic­ture is be­com­ing cru­cial when it comes to prop­erty in­vest­ments. With ex­ports-led sec­tors set to flour­ish in the im­prov­ing eco­nomic cli­mate, fur­ther fu­elled by the agri­cul­ture sec­tor’s re­vival on the heels of an ex­cel­lent mon­soon in 2013, a pick-up in GDP growth by the 3rd quar­ter of 2014 is def­i­nitely on the ta­ble. The mul­ti­ple mea­sures by the cen­tral and state gov­ern­ments as well as the RBI to con­tain in­fla­tion will fur­ther im­prove mar­ket sen­ti­ments.

In­fra­struc­ture not over­sup­ply is key

Most cities have pock­ets with ex­ces­sive sup­ply, as well as pock­ets wherein sup­ply i s se­verely con­strained. De­spite con­cern about eco­nomic growth and high in­fla­tion, ar­eas with ex­ces­sive sup­ply will con­tinue to see de­mand, and there­fore price ap­pre­ci­a­tion. As long as an area is see­ing in­fra­struc­ture de­vel­op­ment, it re­mains a safe in­vest­ment bet.

How­ever, ar­eas which are not im­me­di­ately in line for in­fra­struc­ture en­hance­ment — such as the far sub­urbs of Mum­bai and many ar­eas in Delhi NCR - are def­i­nitely avoid­able. Bud­get­con­scious home­buy­ers grav­i­tate to­wards ar­eas which of­fer rel­a­tively lower real es­tate prices, but they will un­der­stand­ably not com­pro­mise on min­i­mum liv­abil­ity and con­nec­tiv­ity stan­dards. One last ques­tion re­mains unan­swered - that of the elu­sive price cor­rec­tion ver­sus the real, on-ground dis­counts and of­fers cur­rently avail­able.

Con­sid­er­ing that sen­ti­ments are all set to im­prove on the back of in­creased cor­po­rate earn­ings and a re­vi­talised cap­i­tal mar­ket, the cur­rent slug­gish­ness in prop­erty sales can con­tinue for a max­i­mum of two more quar­ters. This in­terim pe­riod is cru­cial for prop­erty buy­ers and in­vestors, as the cur­rently avail­able deals and of­fers will con­tinue for this pe­riod. The ba­sis for this pre­dic­tion is not con­jec­ture, but the vis­i­ble pres­ence of eco­nomic fac­tors that drive growth in the real es­tate sec­tor. The clock is tick­ing and the count­down has be­gun.

Le­gal ex­perts ar­gue that even if the Delhi gov­ern­ment doesn’t own land in Delhi, it has am­ple power to stop unau­tho­rised and il­le­gal ex­pan­sion of colonies. “Though DDA and mu­nic­i­pal bod­ies are em­pow­ered to de­mol­ish any unau­tho­rised con­struc­tion, if the Delhi gov­ern­ment feels that the cor­po­ra­tion is go­ing soft on vi­o­la­tors, it can is­sue or­ders of de­mo­li­tion and mu­nic­i­pal bod­ies would be duty bound to im­ple­ment that. The chief min­is­ter can’t wash his hands of the is­sue by merely ac­cus­ing mu­nic­i­pal bod­ies for cor­rup­tion,” says a se­nior lawyer who has been as­so­ci­ated with the is­sue of regularisation of unau­tho­rised colonies be­fore the Supreme Court.

The apex court had con­ducted hear­ings on the is­sue till April 30, 2013, be­fore trans­fer­ring the mat­ter to the Delhi High Court.

“The SC has not only im­posed a ban on any con­struc­tion in unau­tho­rised colonies but also put a con­di­tion that un­less civic fa­cil­i­ties and in­fra­struc­ture are de­vel­oped in an unau­tho­rised colony, the gov­ern­ment will not reg­u­larise it. The on­go­ing con­struc­tion is in vi­o­la­tion of the SC or­der too,” says Jas­bir Singh Ma­lik, an­other SC ad­vo­cate who ap­peared on be­half of the main pe­ti­tioner in the regularisation mat­ter.

The Delhi gov­ern­ment has de­manded con­trol over the po­lice force but is not ex­er­cis­ing the power it is vested with. “In the last one month, how many t i mes has t he gover nment writ­ten to mu­nic­i­pal bod­ies to check il­le­gal con­struc­tion? The gov­ern­ment can in­struct its dis­trict mag­is­trates and sub-di­vi­sional mag­is­trates to keep a watch on il­le­gal con­struc­tions in their re­spec­tive ar­eas,” Ma­lik adds.

De­spite re­peated ef forts, Delhi’s ur­ban de­vel­op­ment min­is­ter Man­ish Siso­dia did not re­spond to HT Es­tates’ queries.


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