It’s not advantage buyers yet

Ravi Sinha

The slowdown in the property market and the developers’ desperate efforts to ignite the sales through various discounts and freebies has been lending credence to the perception that the property market has turned out to be a buyers’ market now. An impression is gaining ground that this is the best time to buy and the property prices can skyrocket any time soon. However, a closer look suggests that the market is still heavily loaded in favour of the developers, thanks to the gigantic demand-and-supply gap. 

Across the built environment of Indian real estate various stakeholders, including the developers, brokers, consultants and the organised segment of investors are nevertheless trying to convince the buyers about the opportunity cost to buy a house now. The media reports that suggest price correction has happened are lending credence to the theory that the property market in general and the housing market in particular has completely taken a ‘U’ turn in favour of the homebuyers.

Time to make a move?

However, the reports and the perception are by and large distant from the ground reality, as the homebuyers find when they look for a house to buy. As against the advertising trap, a lower BSP and many PLCs & add-on prices or ‘No Hidden Charges’ but with higher BSP is what awaits most of the homebuyers in the market. Many gullible homebuyers fell into this marketing honey trap.

Tony George, a prospective homebuyer in Mohali is extremely confident of the fact that real estate has turned out to be buyers’ market. He is today finding the same property in the secondary market for Rs 7,500 per sq ft that was selling at Rs 8,000 per sq ft only six months back. Not only this, one of his contacts has told him that even in the primary market he will get a deal that is 8-10 per cent lower than the actual value of the property.

“I have been told the developer has not reduced his market price. But on a direct deal with him he has offered to pass on the high brokerage fee directly to the buyer. That is also a huge discount and no less than correction. This is like a dream offer; something that may not be there for long,” says George.

Does this market reality make it the right time to buy a house? George believes it is the perfect time. What then stops him from taking a plunge in the property market that is ideal buyers’ market for him?

“Well, frankly speaking, it has nothing to do with the price point. But my salary is very low at this point of time and the price of apartment is pretty high. Added to this, there is job insecurity all around and all that makes me sacred to commit for such a big invest for a long period of 20 years,” he opens up.

Understanding a buyers’ market

In order to understand the dynamics of what really is a buyers’ market one needs to delve deeper. It is not just some marketing restructuring on part of the developers that can be termed as the buyers’ market. Affordability, of course, is a big factor. But other than the affordability, equally important is the job market in the given city. Inflation and interest rate come the next. An ideal buyers’ market has a combination of all the indicators showing positive signs in tandem.

“Even from the affordability standpoint, any house that costs more than five years of gross income is not affordable. Second simultaneous, and not alternate, condition is that the EMI should not exceed 50 per cent of the take-home salary. On this benchmark, most of the properties in major Indian cities are not affordable. Buyers’ market is a myth,” explains Pranay Vakil, Chairman of Praron Consultancy. It is true that given the price point in most of the key Indian cities, even after the reported, assumed and expected price correction, it does not make a buyers’ market. The RBI Governor, Raghuram Rajan has hence rightly advised the builders for a drastic cut in prices to sell the inventory.

Earlier, a report by Ambit Capital had pointed out that the expected price crash could be even up to 50 per cent in the key Indian cities.

Still a long way from home

Does this market dynamics make it a buyers’ market. Definitely not now! The stakeholders are nevertheless creating a perception that this is the right time to buy. 

This also raises a fundamental question as to how far the perception about price correction is closer to reality. Devina Ghildial, Managing Director, RICS, South Asia, believes real estate values are governed by demand and supply. This may vary on a project-to-project basis. The projects that see good demand normally do not see a price correction. The common dilemma that the consumer poses is which is the right time to buy.

“The ‘right’ time to buy property is when you feel that you are ready for the responsibility that comes along with buying a property. It is important to consider the objectives of buying a property. Ask yourself why you want that property? What really is the motivating factor when it comes to your decision to buy that property? The more you know about why you should buy a property, the more focused your search will be and the better you will be able to select one that meets your requirements,” says Ghildial.

For the end-users who need a house for self-use, this may be an opportunity with some price restructuring of developers, if not correction. It can nevertheless not be termed as a buyers’ market.

— The writer is CEO, Track2Realty