Real Estate

Price gap between ready and under-construction homes down to 3-7 per cent in 2019

Anil Urs Bengaluru | Updated on December 17, 2019 Published on December 17, 2019

The reducing price gap is highly favourable for end-users as well as investors

The price gap between ready-to-move-in (RTM) and under-construction (UC) homes in the top seven cities has reduced to a mere 3-7 per cent in 2019.

The price disparity between the two categories is witnessing a year-on-year (y-o-y) decline - in 2018, the difference was 5-9 per cent and in 2017, it was around 8-12 per cent across the top cities, revealed a study by Anarock.

The reducing price gap is highly favourable for end-users as well as investors. The end-users prefer to see the end-product rather than a floor plan and are usually eager to get off the rental treadmill. Investors previously chose under-construction homes for their lower prices and the compounding capital appreciation as projects neared completion.

Cities with least and highest price difference in 2019

The NCR recorded the least price difference between RTM and UC homes at 3 per cent. The average prices of RTM homes were Rs 4,530 per square feet while for UC homes it was Rs 4,410 per square feet.

Pune had the highest price difference between RTM and UC homes at around 7 per cent. The average price of RTM homes in the city is Rs 5,600 per square feet and UC homes are priced around Rs 5,200 per square feet.

“Previously, the ultimate selling proposition of under-construction homes was significantly lower prices over ready-to-move options," said Anuj Puri, Chairman – Anarock Property Consultants.

"The RTM premium was primarily on the 'instant gratification' quotient, immediate freedom from rent and zero construction risk. In the last two years, the price gap between these two categories has eroded y-o-y. In 2017, the price gap in the top seven cities was anywhere between 8-12 per cent; this reduced to 5-9 per cent in 2018 and sank further to 3-7 per cent in 2019. Along with the other benefits that ready homes provide, they attract no GST.”

Anuj Puri said "Perhaps the main reasons for the reducing gap is that developers are reluctant to hike prices of ready properties amidst the overall slowdown.”

He added, "In a market scenario of limited housing sales, price hikes dampen homebuyer sentiments further. Ready unsold stock will not find many takers if prices increase.”

Prices in top cities

The average price difference between RTM and UC homes in other top cities in 2019: In Hyderabad, the price difference is 6 per cent. The average price of UC homes in 2019 was at Rs 4,015 per square feet while those of RTM properties was Rs 4,250 per square feet.

Bengaluru witnessed a price gap of around 5 per cent - UC homes cost Rs 4,820 per square feet and RTM homes are Rs 5,050 per square feet.

MMR, Chennai and Kolkata saw a price disparity of only 4 per cent between ready and under-construction homes. In MMR, the current average price of UC homes is Rs 10,075 per square feet while RTM properties are priced at Rs 10,460 per square feet.

In Chennai, average prices of UC homes currently are at Rs 4,700 per square feet and Rs 4,880 per square feet for RTM homes. In Kolkata, the average price of UC homes is currently is Rs 4,265 per square feet and Rs 4,420 per square feet for ready homes.

Published on December 17, 2019
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