End-users vs investors: Who has the upper hand in the current market?


While a slowdown in the realty market is never good news, end-users are leveraging the situation to their advantage while investors are staying away, waiting for a stimulus

Who is the trend-setter in the real estate market? Is it end-users or investors? This question is especially relevant now as we are in the midst of another slowdown. To stimulate activity, property developers are regularly coming up with offers and discounts targeted at end-users. Still, inventory has swollen to a critical level and investors are reluctant to spend unless there is a tangible return assurance. On the other hand, property end-users are leveraging the situation to negotiate smartly with developers.

 

* Slowdown gives end-users a bargaining chip.

“In the current residential property market environment, it is still undoubtedly the end-user who is in the driver’s seat. Speculators have all but vanished and while serious investors are still very active, it is the demand from end-users – including their budgets and other requirements – that developers must continue to address,” says Anuj Puri, chairman & country head, JLL India.

Puri cautions that this is not the time for developers to engage in adventurous pricing or to experiment with formats that do not directly address the end-user demand profile. “As the market revives, this scenario might change but for now, it is squarely end-user favouring – and it is their needs which drive it,” he says.

See also: Can a home be bought for end-use as well as investment purposes?

 

* The time is not right for developers to experiment with pricing and formats.

Why end-users are leading over investors

In the current market, end-users are the main source of demand while investors are holding back as there is a significant degree of uncertainty with regard to variables such as lower returns, interest rate scenario and low turnout for investor’s property. Very soon, the recently promulgated Real Estate Regulation Act will take effect and this will boost sentiment among end-users as only authentic and reputed builders will stay in the business.

 

Can we expect better deals in the near term?

“Given the current situation, it is the right time to invest in property for the long-term as one cannot expect speculative gains in the short term. While it is true that average per-square-foot prices have not seen a significant decline in most markets, the decrease has come in the form of smaller configurations, attractive finance schemes like 20:80 leading to lower entry costs as well as the ticket size,” says Surabhi Arora, senior associate director, research, at Colliers India.

However, one should not expect any further concessions as it would not be financially feasible for developers to reduce prices beyond this level. Thus, there is no better time to invest than now, he cautions.

 

What does the future hold?

Experts believe realty end-users will continue their domination in the next few months, at least till the interest rate shows signs of bouncing back and the inventory level alleviates significantly. Investors’ participation in the market is also expected to increase in comparison to end-users, once policies and recent steps taken by the government are duly implemented and the realty market starts showing signs of better returns.

 

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