Not desperate to

buy? Defer

You may be offered discounts and freebies but property prices

could fall if you wait for a few more months
PRIYA NAIR & JOYDEEP GHOSH

umanta Rudra, head of infrastructure

and administration at VFS Global, has
decided to defer buying a property. I am
expecting a correction in property prices. I will
only take a call about buying after the
elections.
With the festival season coming, there will
be a plethora of advertisements in newspapers
and your email boxes will be flooded with promotional mailers goading you to buy property
with catchy lines such as Buy before property prices go up further, Get the best discount, etc.
However, many like Rudra are unwilling to
get carried away. They feel deferring the decision will work in their favour. Of course, there
are other issues. As a banker says, Given the
tough economic conditions, most people are
unwilling to part with liquidity. So, even if
there are great deals, the feeling is lets wait for
some more time. Add to that the Reserve Bank
of Indias (RBI) red flagging of the 20:80
schemes due to fears of default from builder
and people are unwilling to commit, at least for
the time being.
It is not that corrections havent taken place.
Prospective buyers are offered teaser price cuts
of 5-10 per cent in Mumbai and Delhi and
slightly over 10-15 per cent in other cities.
For example, in February 2012, a four-bedroom flat in Jolly Maker 1 at Cuffe Parade, one
of Mumbai's most expensive residential areas,
was sold for ~29 crore. The transaction was
reported widely as the highest-ever price for a
residential apartment. Today, a similar flat in
the same building will not fetch more than
~24-26 crore.
According to National Housing Banks
Residex, an index for property prices, property prices at Cuffe Parade and Malabar Hill of
South Mumbai have fallen by almost nine per
cent in April-June 2013 compared to JanuaryMarch 2013. Even for Mumbai as a whole, the
Residex shows a slight dip in prices. The trend
is similar in 24 out of the 26 cities for which the
National Housing Bank provides data.
In order to sell, some builders are giving
free car parking and/or bearing the stamp duty
and registration. However, no builder will
admit to it since it will send out distress signals
to other potential customers, points out Om
Ahuja, CEO-Residential Services, Jones Lang
LaSalle, India.
The question, for the likes of Rudra, is
whether it will fall further. V K Sharma, managing director and CEO of LIC Housing
Finance, feels if you are buying property for
investment, then you should wait for some
time. A major appreciation in prices from the
current levels looks difficult. If you are not in
urgent need, then it is better to hold your buying decision for now, he says.
If you are looking at buying your first property and, more important, one in which you
intend to stay, the traditional answer is: Dont
look at prices. The answer stays the same, but
with a caveat prices are unlikely to run away
in the near future, so delaying the decision is
unlikely to hurt substantially. If you want to
buy now, ask for discounts. Faced with oversupply, developers will be more than willing if
they are convinced you are a serious buyer.
Little appreciation in the near future
The real estate sector has been in trouble for
some time. However, prices have been
resilient because builders have received funding from potential buyers (through home
loans), private equity and investors.
Meanwhile, builders have launched projects,
which are yet to be sold. In Mumbai itself,

COOLING OFF

Source: National Housing Bank Residex

TO GET A GOOD DEAL ON

YOUR HOUSE:

| Convince the builder of your intention to buy

| Go with your family and carry your cheque book;
be prepared to make immediate downpayment
| Bargain since the builder will not offer discounts
up-front
| Factor in loading, freebies like free kitchen
cabinet or airconditioners, waiver
of stamp duty
while asking for
discount
| Have a preapproved home
loan if you can

WHATS ON THE MENU: Since October-January is considered an auspicious time to buy

property, this is when builders offer discounts on the price or give benefits such as stamp
duty waiver or freebies such as kitchen cabinet or air-conditioners in the house. So, if your
builder is not offering any of these facilities, you can bargain and ask him to reduce the
price to that extent
some 10 million-plus flats priced at over ~1
crore are said to be lying unsold.
Meanwhile, new projects have been
launched even as existing projects havent sold
out completely. Obviously, capital appreciation is not something most experts expect.
Anand Moorthy, head (real estate services) at
RBS Financial Services, says there is humongous supply in most residential areas, even in
the secondary market. Investors should not
expect more than five-to-eight per cent growth
in prices in most cities for the coming one-two
year horizon for realistic gains. Another reason
to wait, especially for investors, is because real
estate is not liquid.
Anuj Nangpal, managing director (investor
services ) at DTZ India, says: The anticipated
downward pressure on prices is expected to
prevail in the short-term owing to significant
inventory overhand across most micro markets. Additionally, the recent hike in home
loan interest rates along with continued slow-

down in economic environment has further

dampened sentiments amongst prospective
end users. The consequent drop in demand
has further limited any opportunity for price
appreciation in near future, he says.
Is this a buyers market?
Some feel that buyers are on a stronger wicket. Lalit Jain, chairman of the Confederation
of Real Estate Developers Associations of
India, says: Our costs have increased substantially. In fact, we have sent an advisory to
our members saying they can sell at the lowest prices due to the liquidity crunch. What
customers are getting today is the best price
and at the first possible trigger, at the first
signs of economic situation improving, prices
will go up. Developers are giving good bargains even to individual buyers.
There are some things that will work in your
favour while bargaining. While those looking to
buy should bargain for good rates, they should

not hope for the developer to offer it to them.

There is very high probability that you can get
discounts. In a market like Mumbai, a discount
of even five per cent is good. In other markets,
you can get 10-15 per cent or even 20 per cent,
says Sanjay Dutt, executive managing director (south Asia) of Cushman & Wakefield.
Buyers with pre-approved home loans in hand
are in a position to bargain for a better price. In
fact, simple things such as going with your
family members and with a cheque book to
make the downpayment will show you are a
serious buyer and ensure good discounts.
Since October-January is considered an
auspicious time to buy property, this is when
builders offer discounts on the price or give
benefits such as stamp duty waiver or freebies
such as kitchen cabinet or air-conditioners in
the house. So, if your builder is not offering any
of these facilities, you can bargain and ask him
to reduce the price to that extent.
If you are looking to buy a property in a
premium project, going with an up-front payment will ensure you get discounts. The retail
market is largely broker-driven. So if you
approach the builder directly, you can straightway ask for a two per cent discount on the
price. You can also ask to include the loading
and ask the builder for a discount. Loading is
the carpet area (the actual usable area of the
house) minus the super built-up area (nonhabitable area such as staircase, veranda etc).
In Mumbai, Thane and Pune, the loading is
40-50 per cent; in Chennai, Bangalore and
Hyderabad it is about 30-35 per cent, while in
Gurgaon it is 35-40 per cent.
Compare carpet loading factor and amenities cost. Builders have a decent spread and
now they are willing to sacrifice some of it,
says Moorthy of RBS Financial Services.
Waiting period
According to Dutt, the good time to invest in
real estate is between now and March 2014,
the festival period starting with Ganesh
Chathurthi and ending with Gudi Padwa.
There is also a good chance of getting attractive
deals in land and residential apartments
because of the market conditions, with lower
sales and new supply hitting the market.
Once the general elections are over and there
is some political and economic stability, the window of opportunity will be over, says Dutt.
In fact, with harder rules on project
approvals, land acquisition and taxation on
property coming in, developers will have to
raise prices to stay relevant in the market and
solvent in their businesses. However, there are
enough existing projects and inventory with
many builders, which will have to be cleared
before the impact of the Land Acquisition Bill
comes into play.