Indians are emotionally wired invest in real estate on the auspicious dates during the yearly festival season. However, this seems to be changing in the property market this time as economic rationale says otherwise.
A festive survey by real estate form Track2Realty shows 70% Indians are apprehensive of cost escalation this festive season. Of these, 78% believe that the appreciation would be in the range of 10-12%. The survey delved deeper into the consumer psychograph of the homebuyers to assess their buying intentions as well as outlook towards the real estate as an asset class to invest. The survey found that even though a vast majority of home buyers, 82% to be precise, point out that the affordability curve has gone way too high, they still feel appreciation is there on the cards.
Track2Realty, a real estate thinktank group, conducted this survey between August 20 to September 5 to gauge the mood of the homebuyers ahead of the festivals. The survey was conducted in 10 cities, including Delhi, Noida, Gurugram, Mumbai, Pune, Ahmedabad, Bengaluru, Hyderabad, Chennai and Kolkata.
The findings of the pan-India survey by show that expecting a price rise, many prospective homebuyers are negotiating with the builder to freeze the price beforehand only to make the final formalities during the festivals. More than half the buyers haved zeroed on the property— as many as 58% have finalised the deal much before the inauspicious shraadh begins.
“I have negotiated the price with the builder, as my trusted broker informed me that the prices would escalated to Rs 500 during the Navratra. For a 1000 sq foot of 2BHK apartment, that is an extra cost of Rs 5 lakh. So, I have made the commitment and paid a token amount of INR 1 lakh. The buying formalities and the paper work will be done either during Navratra or Dhanteras,” says Sumedha Shukla, a 32-year-old media professional in Noida.
The question is whether there is any room for price appreciation in the overheated and competitive property market of India? Sixty four per cent Indians feel in the present economic uncertainties after the Covid, property has emerged as the safest parking lot of conservative Indians who still see stock market returns as gambling with higher degree of risk associated.
There is a general feeling across the investors that stock market is way too volatile and hence property and gold are the safest bets. 78% Indians are apprehensive of stock market volatility and would avoid high risk for high returns.
There is also a general feeling among the Indians that even in the wake of a slowdown in India borne out of global recession the asset class that will show maximum resilience would be property– 80% Indians feel property may not have given the highest returns in the past but has never grown at a lesser pace than inflation.
“I am investing in my second home now and am still wondering whether to make a commitment now or wait for the festive offers. The friends and family that I have spoken to caution me that instead of festive offers there might be a price hike this festive season. As an investor looking for both capital gains and rental returns, I feel property and gold are the safest bet, and in the long run CAGR returns would be in the double digit. More importantly, my investments are safe, compared to any other financial product,” says Suresh M, a 48-year-old textile entrepreneur in Bangalore.
Which are the segments of property that would witness to max price hike? Well, a vast majority of the Indians, 82% feel it is the luxury housing that would be witness to more price hike. Affordable housing would be least affected in terms of the festive spirit property price hike, maintain as many as 70% home buyers.
“In a price sensitive affordable housing, there is not much scope of price hike. Any hike of even Rs 200 psf would dent the buying intentions of a majority of the buyers. In contrast, the luxury buyers have financial flexibility, and they look for value proposition rather than saving a few lakh rupees here and there. I feel luxury housing and commercial properties might see sizable appreciation this festive season,” maintains Kaushal Soni, a 32-year-old IT employee in Mumbai.
Wouldn’t it be counter intuitive to economic rationale that developers would hike the property prices at a festive time when buyers look for discounts and freebies? A vast majority of the Indians don’t think so. They rather believe— 62% said so–with less ready to move inventory the developers are no longer as desperate as they were a few years back with standing inventory bothering their respective balance sheets.
Fifty-six per cent Indians are expecting more new launches this festive season. 66% Indians even believe that with the economic uncertainties and insecure job market there might be lesser transactions, in terms of volume, but the value (read value/price) would definitely go up.
“The resilience of the Indian property market during the global pandemic seems to have instilled the confidence of the investors into the property landscape. What comes out as a surprising perception among the Indians is the fact that they believe if there is recession in the US or China, it will rather boost the Indian property market,” says the survey.
Sixty per cent of the survey respondents even maintained that with the global investors pumping money into the Indian property market, the returns in the property market are expected to be way higher than any other asset class.
Which are the cities where the Indians believe price appreciation would be highest this festive season? Mumbai was voted as the place to witness maximum appreciation with 80%respondents feeling so, followed by Kolkata with 72% respondents and Noida 68% respondents.
“Even in the worst global recession in the US leading to housing foreclosure over there, the Indian property prices had not gone down. As a matter of fact, it continued its upward momentum, though rather slowly, when the other investment products were giving panic to average Indians. A price hike during this festive season might bring the buyers into the market ahead of the festivals; those Indians who are invested in property do wish for the prices to appreciate,” sums up an upbeat home buyer, Rajesh Kalra, a 54-year-old chartered accountant in Gurgaon.
(The author is CEO – Track2Realty)
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Ravi Sinha is a journalist with nearly two decades of cross-discipline media exposure. He is the CEO of real estate think-tank group Track2Realty. He has been writing extensively on the real estate sector for nearly a decade. Evaluation of real estate brand performance is his expertise and he has immense insight into consumers’ psychograph in the property market.
Twitter: https://twitter.com/ravitrack2media
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