Real Estate

‘Falling property prices have contributed to the lack of positive sentiment’

Anil Urs Bengaluru | Updated on December 31, 2019 Published on December 31, 2019

Declining prices tend to put off buyers, who would rather not invest in assets that are losing value: Anuj Puri, Chairman, Anarock Property Consultants

 

“There is no single answer to why houses are not selling as quickly as they used to - it is a matter of sentiment, and sentiment reacts to a number of factors. The slowdown in the Indian sector is not the result of any one factor, though many will be tempted to assume that over-pricing is the main culprit,” according to Anuj Puri, Chairman, Anarock Property Consultants.

He adds: “The assumption that lower prices will cause demand to kick in is half-baked. When prices decrease, buyers cannot be sure that prices have bottomed out or will sink further. If they do reduce further, they would have invested their money in an asset that is losing rather than gaining value. The added cost of GST on under-construction houses is, understandably, not perceived as a value-addition. After all, when one puts the same property on the resale market at some point, one cannot recover the GST cost because it is not applicable on secondary sales.”

‘Falling prices have hit sentiment’

The fact is that people were buying homes when most markets were heavily and obviously over-priced. Therefore, prices are not the main reason for why the Indian housing market has been under strain for so long - at least in the sense that they are unaffordable. “Actually, the very fact that prices have been falling has contributed to the lack of positive sentiment,” said Puri.

In recent years, aspiring homebuyers have also put off purchase decisions on account of a lack of confidence. Confidence is a by-product of enough enabling factors working well in unison. It goes for a toss when aspiring buyers feel disempowered, financially insecure, intimidated, confused and angry when unscrupulous dealings come to light, and when they hear all to often about how buyers have been taken for a ride.

RERA still finding its feet

RERA was meant to infuse some badly-needed confidence, but while it has managed to do so to some extent, its success in catalysing fresh housing demand has been rather patchy and inconsistent. RERA is by no means a done deal and is still finding its feet in some parts of the country, even as it faces an outcry about dilutions in other parts.

The cost of acquisition of under-construction homes has increased with the imposition of GST on them. “Many developers are also willing to offer discounts or freebies to offset this burden. However, people will only buy homes when they perceive that they are getting true value for money and they have the assurance that they are investing in an appreciating asset - not a depreciating one,” said Puri.

Also read: Residential sales plummet 22 per cent in H2 2019: Anarock

 

Published on December 31, 2019
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