The Hindu Business Line : Buyers’ market scenario emerging in real estate

Hyderabad, Dec. 27 Is the real estate sector heading towards a buyers’ market just like the auto sector has turned into with plenty of choices, discounts and freebies doled out due to the slowdown?

If the inputs from sector players and industry-trackers are anything to go by, it has already become a buyers’ market.

While developers are cautious about admitting to price correction, the sector is witness to 15-20 per cent cuts already and there is potential for more.

Tough scene

Providing a demand-side perspective, Mr Hari Challa, Managing Director of Aliens Group, said: “For new buyers we need to step up marketing efforts significantly. This was not the case in the last few years where the demand was from buyers.”

The Vice-President, Properties, IJM (I) Infrastructure, Mr Manjit Singh Brar, said that the market conditions have become tough.

“As someone executing township projects in several parts of the country, we find most of the buyers are postponing decision on new projects in the hope that prices will come down further,” he said.

Drawing a parallel from a similar situation Malaysia passed through after the South Asian economies collapsed in the early 90s, Mr Brar (who comes with a Malaysian background) said that the Government played a big role in reviving the sector by bringing down interest rates and stamp duties. Similar push is required in India now, he added.

Reversal

The Real Estate Analyst at Angel Broking, Mr Sailesh Kanani, said: “After four-five years of boom phase, real estate has begun to face the heat of the slowdown just like most other sectors of the economy. We believe that this slowdown will only get more pronounced.”

Mr Challa of Aliens Group said, “About a year ago, we would sit tight and prospective buyers would knock on our doors expressing their interest to buy. Now we deploy marketing teams to convince buyers, a reflection of the current tough market conditions. Some buyers are also offering concessions such as free parking or free registration.”

Developers are delaying commissioning of new projects as they call for fresh investments.

The thrust is on completing projects under execution and ensuring that they have buyers. However, when projects are sold with a margin of, say, 10-20 per cent, even if 70 per cent of apartments are sold, the developer could be in trouble, Mr Brar said.

Mr Challa said that it is turning out to be a buyers’ market and developers need to adjust to this changing reality.

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