Personal Finance

Home Truths: What's in store for home buyers in 2018

Meera Siva | Updated on March 10, 2018

The property market is likely to favour buyers this year

If buying a home is on your wish list for 2018, you may find this year much better than the past. Home buyers have cause for cheer — more choices, lower prices, improving developer accountability and increasing transparency.

The happy expectations are partly a result of policy changes such as the RERA and partly the sorry state of the property market. These certainly existed in 2017 also, but the benefits of these are likely to fructify for buyers this year.

More choices

Large unsold inventory and low demand are giving buyers lots of chances to cherry-pick. Data on property inventory shows that there is a total of 6.85 lakh unsold homes in major metro cities.

Given the dip in demand and the introduction of RERA in 2017, builders held off new launches and focussed on their existing projects, improving the chances of completion and delivery. So, 2018 will likely see more completed homes in the market.

Developers are also adding offers — such as modular kitchen or air-conditioning — to attract buyers and close the sale. These freebies shouldn’t be the sole reasons guiding your decision; but you will certainly find that many builders are eager to woo buyers in this manner.

Better prices

Lower prices may also bring cheer to buyers this year as builders try to clear their inventory. In 2017, it was widely expected that property prices would plummet. But this did not materialise in many cities.

One reason was that developers did not launch new projects. They also stood their ground firmly — rather than selling at lower prices, they continued completion with the hope of maintaining prices.

While ready-to-occupy homes have fetched higher prices compared to under-construction homes in the past, this trend may not play out this year. For one, developers are under financial stress.

Two, the income tax department is likely to tax developers for homes that are unsold for over one year, as a part of an anti-hoarding initiative. These may add pressure and knock down rates.

Land distress

The year 2018 may be a turning point for land, as it loses its sheen as an investment option. The lull started in 2017 — after demonetisation and the amendment to the Benami Transactions Act, land transactions nearly dried up.

In the past, there were ample opportunities for buying land in the semi-urban or peri-urban (beyond the suburbs) areas, as expected infrastructure development in these areas and growth in urban population led to multi-fold price growth. Builders — home and commercial — also often bought large tracts for their land bank.

In 2018, besides regulatory headwinds, increased supply of land and low demand could lead to dramatic fall in land prices. On the supply side, builders may turn sellers as they cash out their land bank to complete projects. Many owners, who bought land as an investment, may want to liquidate and invest in other assets. Demand is expected to pick up only when prices fall.

Resale deals

Home buyers are also likely to find good deals in the secondary market for resale homes. In 2017, property transactions were sluggish, as sellers and buyers took a cautious stance. Many sellers decided to wait and watch rather than place their home or land in the market. This reduced supply and somewhat helped to stabilise prices.

However, anecdotal data shows that current market prices are much less than what owners imagine their property is worth.

Sellers who need the cash are likely to lower their expectation, hoping to complete the transaction in 2018. So, buyers will have additional choices and better prices if they look at options beyond new homes.

Service focus

The year may also see a slight shift in the service aspects of property. In general, services related to real estate — brokers, property management, legal and tax — are not well developed. This may improve in 2018, boosted by RERA, which is expected to improve the standard of agents. Owners may want to increase their return through rents, given capital appreciation may remain subdued. These factors may drive demand and availability of property-related services.

The writer is co-founder, RaNa Investment Advisors

Published on December 30, 2017

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