MCHI's property exhibition in Mumbai where 50 developers showcased 2,500 properties across city and its suburbs suggests price will not come down sharply despite weak demand from end-users.
There were a few discounts or promotional schemes on offer but none more than 5 percent of the sales price.
Affordability remains the key concern and a revival hinges upon income growth or a decline in property prices. However, even though sales volumes are down over 40 percent from the peak, developers have offset the losses by 40-100 percent price hikes over the last three years.
The Maharashtra Chamber of Housing Industry (MCHI) had organised a four-day property expo at Bandra Kurla Complex from 17 to 20 October, where properties in the price range of Rs 15 lakh to Rs 10 crore were showcased. While developers have not really raised property prices in the last six months, a stable real estate market still did not result in price correction as was widely expected by prospective buyers. Instead builders are still hinging on discounts and freebies to step up sales.
Prices have remained flat or increased marginally by up to 10 percent from the last MCHI property expo that was held in April 2013.
New launches, however, are being offered at a 5-10 percent discount to the price of projects that are nearing completion.
The only silver lining is that developers in the luxury or premium housing markets of Lower Parel, Worli, Wadala and Upper Worli have started marketing their projects at all-inclusive prices and have done away with 'floor rise', which is the premium that you pay for a flat on a higher floor.
However,premium projects were hardly showcased at the expo as developers believe these are positioned for the different set of buyers. Most of these projects are now being marketed with a composite pricing inclusive of the floor rise and prices ranging Rs 22,000-33,000/sq ft against Rs 35,000-40,000 a year earlier.
An analysis by Karvy Broking shows that even though B-grade developers have lowered the selling price by about 5 percent, A-grade developers refuse to do so.
Only 10 percent of the developers offered discounts. Among them are Runwal (5% cash back on the agreement value for registration + stamp duty), (ii) Omkar Builders(not charging floor rise for Alta Monter project, though the prices have increased by 20% to capture the floor rise),Nirmal Developers (offering Rs 5 lakh as cash back for Nirmal US Open and Turquoise projects in Mulund) andGundecha (free stamp duty & registration, implying a 5% discount).
"Whilst the 'Carpet Area' of dream flat has been shrinking the MCHI stall sizes have been increasing showing no signs of stress. Very limited offers on discount or free registration/stamp duty that too by B Grade developers. Lowest price in Western suburbs is now Rs 12,500/sq ft, Central suburbs Rs 9,500/sq ft implying 'dreaming is no hope'," saidParikshit Kandpal, real estate analyst at Karvy Broking.
This is likely to dampen sentiment of thebuyers, who were expecting a bigger price correction this festival season. After all, demand is intact, affordability is the problem, and builders are well aware of this.
So why was the property expo such a disappointment?
"Like equity markets, real estate has largely remained flat in the last couple of years. Apart from the few key players in equity, the market has more or less remained flat. Similarly, in real estate apart from a few investors, buyers have mostly stayed away and builders cannot admittedly reduce prices by 25-30 percent because they have sold units to these investors at a very high price. Add to that the high construction and borrowing costs,"says Pankaj Kapoor, MD at real estate research firm Liases Foras.
If builders are willing to give over 5 percent discount upfront, it means net-net you will get 10-15 percent discount at the negotiation level, he adds. But a price crash is out of question unless there is absolute panic in the market. While the next two years will see a price correction, it will be a time correction rather than an immediate one.
So the unfortunate take away from the expo was that you may have to wait longer if you are looking to buy a ready-to-move-in property. You are probably better off buying a home in the secondary market, which has seen a 20-25 percent discount to the ongoing market rate in Mumbai.
"We don't expect any sharp correction in the property prices in the Mumbai owing to scarce land availability and limited stock. Whilst the high property prices have left limited price differential between Western suburbs & Central suburbs premium (0-10%) Goregaon would continue to see higher traction owing to supporting infrastructure & Social amenities. The way prices have moved the neighbouring markets of Navi Mumbai, Pune would witness a renewed Mumbai investors activity and interest. Central Mumbai is seeing an oversupply though the price correction would be more of a time correction as prices have remained flat," added Kandpal.
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Updated Date: Dec 21, 2014 05:05:35 IST