The real estate sector is struggling to emerge from the rough patch it hit a couple of years ago. Inventory has been piling up across the country as buyers put on hold purchase decisions.
A sluggish economy, uncertainties on the job front and high home loans rates have all added to investor apathy towards real estate. This has been further fuelled by developers' inability to bring down prices despite lack of demand due to high input costs.
As a case in point, the National Capital Region (NCR), not long ago among the most favoured destinations for real estate investors, is witnessing a pile-up of unsold inventory. According to Liases Foras, a real estate research company, in April-June 2014, it had the highest backlog of unsold units in the country, which at the present rate of absorption would take nearly four-and-a-half years to clear.
The total unsold units across six major real estate markets -Bengaluru, Chennai, Hyderabad, Mumbai Metropolitan Region, National Capital Region and Pune - stands at a huge 6.4 lakh units. And then there is fresh supply coming in at a fast pace.
In such a situation, where are real estate prices headed? Would they fall because of simple supply-demand dynamics? Should you invest at this point or wait for some more time? If you have savings to make the down payment and want to move into your own home, which are the best places that you should consider? We look at all these aspects in our cover story. The good news is that the sentiment in the real estate sector is improving.
A Sentiment index, launched by Knight Frank and the Federation of Indian Chambers of Commerce and Industry (FICCI ), has risen to 69 in the quarter of April-June, up from 50 since it was launched in 2013, indicating that the outlook of developers and lenders is turning positive. Moreover, the government has made several announcements in the Union Budget that are likely to rejuvenate the sector, including providing tax incentives to Real Estate Investment Trusts (Reits), easing of foreign direct investment norms for the sector and incentives for building affordable homes.
All this is likely to once again set the sector in motion. Investments made now might give decent returns, if decisions are taken wisely, considering price, location and construction quality.
However, the days of flipping property to make quick gains are over. Investment in real estate has to be for the long haul. In case you take the plunge right away, our advice is that you must bargain hard to get the best deal. Builders and brokers will only too happy to offload inventory at a discount. And if you are not in a tearing hurry, maybe you should wait a while and look at the festive offers from both developers and lenders before you strike the deal.