The Hindu Business Line : To buy or not to buy…

Mr T Srinivas, an insurance analyst with a multinational IT solutions company, moved to Hyderabad a year ago. Since then he has been on the lookout for a flat but has been unable to find one to suit his budget and requirements. He is one among thousands waiting for the right time. But when is the right time? Now, say experts.

The right time, they explain, is the moment you take the decision to buy a house or flat. Entering into a project quite early could actually help home buyers. As the project progresses, the price will only go up, they argue. “There is no better day than today to seal a deal with the builder as the cost of major components that go into a housing project is only growing,” says Mr Radhakrishna, Chairman and Managing Director of the Hyderabad-based Saket Engineers.

“The cost of land is just one component in a housing project. In most cases, it is only 20 per cent of the total project cost. The prices of inputs such as steel and cement are also growing. No builder is going to reduce prices. So, there is no point postponing one’s decision,” he says.

With the real-estate sector witnessing a bearish situation, there is a likelihood of builders fine-tuning the size of flats keeping in mind the affordability of buyers. “One might need to stretch the budget by an extra Rs 4-5 lakh to realise one’s dream,” he says.

‘Correction happening ’

Mr G Yoganand, Managing Director of Manjeera Constructions, says affordability has come down with interest rates shooting up significantly. As repayment capacities have come down, the market has seen a downward trend. Construction costs too are growing.

“Input costs were up by 5 per cent earlier. But now they are turning costlier by 25-30 per cent. Besides, labour cost has gone up 50 per cent. Also, you don’t find a good number of implementing agencies, such as contractors,” he says. The situation will only worsen, he feels. In some cases, rates have come down on irrational growth. In other cases, builders have reduced prices in order to share the burden of the buyers. “But they can’t reduce it further,” he says.

He, however, advises buyers to go in for a project that has begun.

“Two years ago, people were booking (apartments) as if there would be none to buy tomorrow. But now, too much supply is chasing a small number of buyers. A course correction is under way. Prices are getting rationalised. It is the best time for the buyer to pick one,” Mr P. Surya Prakash, Managing Director of SatyaVani group of companies, feels.

According to him, there has always been steady growth all through. “It is only hype that made the product costlier,” he says. He too says that big-sized flats will make way for smaller ones.

“People are already talking of 650-800 sq.ft flats. A price of Rs 2,500 per sq.ft is fair, at present. While Rs 1,000-1,200 is cost of construction, an equal amount will go to the land owner. This means that the Rs 2,500 rate is a fair deal,” he says.

‘Only one way to go — up’

Mr V.V.S. Reddy, Managing Director of Indica Homes Private Ltd, and member of the Opus consortium with 11 builders, says the price of land, like gold, will only move one way — upwards. Better to go ahead when you know you can afford and have some surplus money.

Opus is planning a Rs 1,500-crore housing project at Miyapur in Hyderabad in association with Sunway Berhad of Malaysia.

Stating that many multinational construction companies have started investing in India, he says this indicates the steady growth in the demand for residential space. It holds good for smaller cities such as Nellore and Visakhapatnam.

“There were times when builders had to bear with sluggish sales of flats in the top-most floor, in places such as Nellore. Now, you will not find unoccupied flats even there,” he says.

“As a consortium, we are studying various cities in the South such as Bangalore, Mysore and Chennai. We observe similar trends in these cities,” he says.

Meanwhile, Mr Srinivas, the prospective flat buyer, has a different view. “Agreed, I have decided to buy a flat. But I can’t buy it for the sake of buying. Even if I want to spend Rs 40 lakh, I’m not sure whether I can get a quality product,” he says.