Bottom Line: Track2Realty goes into the depth of demand analysis to find that there is no scientific methodology adopted by the developers to assess demand in the market.Â
Beyond the economic rationale, the developers assert that they are doing their homework properly. One of the largest developers claims it has its own empanelled brokers to give constant feedback on the market before the launch of any new project. They supplement it with a proper in-house research of the market, the catchment area, competition and other market forces.
Once the feedback is taken from every possible end and data collated and analysed, there are hardly any chances of demand-supply mismatch.
SARE Homes claims to use the latest scientific methods to identify and meet the needs of customers. This includes in-depth research of the market forces, which helps in targeting customer requirements. The research includes desk as well as field research and the hiring of commercial agencies. This is an important aspect as, with changing times, customer demands are ever changing.
Kolkata-based Srijan Realty claims that before investing in a new project they organise a project viability analysis through their realtor partner NK Realtors. This include the market research, project suitability, demand assessment, project composition and product mix as well as idea about project pricing.
However, not many developers seem to have this much confidence with the market feedback. It has also gone wrong as brokers prefer to sell high-end projects nowadays, leading to plethora of luxury launches while the demand exists in affordable and mid segment housing in most of the micro markets across the country.
The main determinants of the demand for housing are demographic
Along with demographic, factors like income, price of housing, cost and availability of credit, consumer preferences, investor preferences, price of substitutes, and price of complements, all play a role
Demand assessment and market intelligence quite misleading in Indian real estateÂ
Instead of market defining demand nowadays competition or rather a rat race is defining the demand which leads to cluttered & over supplied pockets of real estate growth. In certain locations appreciation potential is huge and also housing shortage suggests that developers should launch more projects over there. But, on the contrary, over supplied and saturated markets get more launches which defies the conventional wisdom of demand-supply economics.
That probably justifies why certain markets are over heated with maximum launches and record inventory since the institutional investors have deep pockets and pipeline visibility make them calculate the right ROI (Return on Investment) at the right time in the right market. But the very same influencers in the research/report do little justice to the developersâ€™ cause or the homebuyersâ€™ need of a house.
In the absence of due diligence often the Indian real estate market loses sight of fundamentals and gets carried by positive news stories. With no analytical techniques available to support the story with the fundamentals, a catch 22 situation hurts all the stakeholders â€” the developers, homebuyers, investors and lenders.
The market intelligence of the so-called discerning buyers is only reflective of macro level assessment of property consultants and media which more often than not goes off track.
A section of analysts admit that due diligence has always been done in the Indian realty but the Bull Run made the developers, investors and also the homebuyers a bit over ambitious to ignore the fundamentals in order to get into higher profits with far higher risks. However, the slowdown has taught everyone a lesson and now the developers as well as the homebuyers are over cautious at each and every level.
However, the fact remains that in the absence of a scientific and industry accepted mechanism of due diligence the challenges and risk exposure are as much for the realtors as for the organised investors. Retail buyers any way are clueless with various conflicting reports on the same market.
By: Ravi Sinha
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