The year 2008 began with a bang for the real estate sector. It seemed as if the property prices would defy the law of gravity forever, as buyers didn’t seem to mind paying a fortune to acquire huge house with modern amenities. However, thanks to the economic slowdown, the picture has not been rosy since the second half of the year. According to real estate experts, the scene is going to change and 2009 is going to be a better year. And, according to them, action is going to be in the affordable housing segment.
Higher interest rates, inflation, large house sizes and economic slowdown have spoiled the mood in the real estate sector since the second half of the year. However, November-December period has been better one for the sector. There is considerable amount of pick up in affordable housing segment. All the new projects which have come up with affordable budgets and convenient location have seen good demand.
However, real estate pundits believe that it will take a while before the segment bounces back. The recent interest rate concessions on low cost housing have fuelled hopes of further sops. But, most people are still waiting for property prices and interest rates to come down further.
According to real estate analysts prices of property have already come down by 20-25% in smaller cities, and there have been price corrections in certain pockets in metros too. Developers are reducing prices in their individual capacity already. People who have acquired land at lower prices have already cut their prices and getting good response from prospective buyers. But, developers who have bought the land at higher price would find it difficult to cut prices.
The number of queries has increased considerably in recent times. One can be only hopeful that if interest rates continue to fall further, things would improve dramatically in the next three months.
Real estate players are also hopeful that the recent interest rate concession for houses below Rs 20 lakh could spur demand for second homes or weekend homes in the outskirts of major cities. Once customers become convinced that the property prices and interest rates are in line with their budgets, they would start looking at this option. However, it is not likely to happen immediately. According to some realtors, the sops could actually prompt players to look at even first house in a far off location. For example, a place like Mumbai is well connected by train. People won’t mind buying a place if it is within their budget and the location is convenient. However, big ticket purchases such as luxury apartments and farm houses seem a bit remote. At the moment there is not much query about these cases. People seem to be postponing their decisions because they are worried about their career prospects. Once things start looking up, especially in the financial sector, it is quite possible that people would show more interest.
In fact it is not the interest rates or buyers waiting to see a further fall in realty rates. Earlier the demand was due to investors of real estate who earned their finances from speculation or Stock Markets. The demand on account of actual requirement of purchasers was far less compared to realty investors. No doubt the first half of 2009 may be good for buying realty provided the dealing is completed prudently. Thereafter the principle of natural justice that is demand being equal to supply the real realty prices may be transacted.