Caught in a bind

With this year’s Union Budget failing to give the expected boost to the realty sector, it is not only the developers who are a disappointed lot, even homebuyers who had been deferring their purchase decisions in anticipation of some favourable sops and more price correction have failed to get the “benefit” of patience.

However, according to market watchers, over the past couple of weeks there has been a slight shift in the buyer focus as the homebuyers who had been waiting for the prices to bottom out further are now more willing to finalise the deals. The announcement of rate cut by RBI recently has also acted as a catalyst for buyers in this scenario. “There has been a significant increase in the number of inquiries as the chances of further correction in prices are remote now. Actually with an increased service tax of 14 per cent, the new under-construction flats are going to cost more after April 1, 2015”, says Rakesh Kumar, a Panchkula-based property consultant. This is one of the main reasons for an increase in the number of queries in the primary market in the periphery areas of tricity like Zirakpur, Dera Bassi, Greater Mohali, Mullanpur etc.

But things are different as far as the secondary market is concerned, especially in a low-supply market like Chandigarh, where the “wait-and-watch” game between the buyers and sellers is far from over. While there is a thaw in the buyers’ attitude here due to the realisation that the prices are not likely to go down any further, it is the sellers who are developing cold feet at present in the hope of a price escaalation and also because selling property at this juncture is in effect a “losing” proposition.

The demand and supply scales are heavily skewed in Chandigarh as there is very limited choice for buyers. “If you are looking for a preferential location like park facing or in a specific sector then there is very little choice even though there has been a price correction in the city over the past three years”, says Sandeep Garg, a Mohali-based businessman, who has been nursing the dream of owning a house in Chandigarh for the past couple of years. While the prices in Chandigarh have seen a drop of 25 to 30 per cent in certain pockets, the sale volume has remained stagnant. According to property consultants operating in different pockets of the city, the current average rate in Chandigarh for a 10 marla plot is Rs3.25 to Rs3.5 crore while a 500 sq yd plot can cost around Rs6.5 crore. “The Chandigarh realty market has remained stagnant for the past three years because firstly the supply is limited and secondly certain policy decisions like increase in Collector Rates have had an adverse effect”, says Sanjeev Sharma of city-based Shree Properties. The Collector Rates were increased by nearly 50 per cent in one go in 2013 to Rs82364 per sq yd from around Rs54,000 per sq yd. As a result if the cost of registry of a 10-marla plot in 2012-2013 was around Rs1.25 crore, it is now over Rs2 crore. So there is a considerable difference in the capital gain and as a result the seller has to pay hefty tax. “This has hit the sales in the city as in reality the prices have gone down and with increased Collector Rates the sellers are actually suffering a loss by selling the property at this time”, explains Sharma. Moreover, the Collector Rate is uniform all over the city even though there is a considerable variation in prices in the “elite” northern sectors and the southern sectors. This imbalance has hit the property market in the southern sectors as there are very few sellers who want to sell within the next few months. Market watchers have termed the hike in Collector Rates as arbitrary and illogical as the usual practice is of an increase of around 10 to 15 per cent, which keeps the prices balanced and the market vibrant. While a lesser gap between Collector Rate and the market rate means less circulation of black money, but a steep hike of almost 50 per cent in one go in a market plagued by slowdown can sound the death knell for realty transactions. “This steep hike and that too at a time when the prices were falling have made investment in property in Chandigarh non-lucrative,” rues Sunil Dang, another local property dealer. In fact, in some of the pockets the Collector Rate is more than the current market rate. “The situation is worse in the commercial property scene as in some areas the price of a showroom is Rs4 crore, while the registry can be got done for only Rs5 crore. Who will buy in this case?”, asks Sharma.

This factor has also hit the chances of buyers like Garg as with higher cost of registry of property the requirement of home loan amount has also increased substantially. “But the banks decide loan amount on the basis of my income and paying capacity and both of these have not increased in proportion to the increased cost that I have to pay for registry of property in Chandigarh now”, he rues.

So, while the realty market may see some revival over the next few months in the country, things are likely to remain bleak in Chandigarh for till the time this logjam continues.