Property buyers upbeat amidst restricted supply

By: Ravi Sinha

Track2Realty Exclusive on Akshay Tritiya

Anmol Shah, the Gujarati businessman settled in Mumbai, has both the emotional as well as rational reasons to invest in property this time on Akshay Tritiya. His astrologer has suggested that very much like a few years back when he bought his first flat in Mumbai, followed by an office in one of the Central Business Districts (CBD) on Akshay Tritiya, he should yet again buy the second house on the auspicious day this year. After all, appreciation of his flat and his business has grown manifold, thanks to blessings of Akshay Tritiya as astrologers remind him. On a rational level also, with interest rate cut on home loans and prices stagnant across many micro markets of India’s financial capital, if not bottoming out, it makes sense to invest in the property market.

This may sound as an indicator of a promising market emerging on the eve of Akshay Tritiya and overall sentiments bullish. Interest rate cut, extension of home loan subvention scheme and External Commercial Borrowing (ECB) allowed in the affordable housing in the Union Budget 2012-13, all indicates that mayhem is over in the Mumbai property market. Then why are the developers complaining? More importantly, why has property transaction been at a record low in the city?

Well, prima facie what appears to be the grouse of developers is actually the dilemma of property buyers like Shah. With very few launches happening in the last six months and not very many expected on Akshay Tritiya also, the Mumbai realty is fast turning out to be neither buyers’ market nor sellers’ market, rather it is a no one’s market. A closer look at the property market reveals how the macro level indicators are often misleading in the Mumbai property, and micro level realities are more confusing than conducive at this point of time.

Hence, on the eve of Akshay Tritiya while the property buyers are upbeat, market analysts are worried with the restricted supply of new launches and the developers outrightly blame the non-conducive regulatory environment for the mess in the market. A sample survey across the city of Mumbai by Track2Realty reveals the nature of property market transaction in the last 12 months. Nearly nine, as many as 85 per cent, of the buyers have bought the flats out of the compulsive needs. Developers’ freebies and offers on auspicious days like Navratra and Akshay Tritiya is something that has translated into sales only for as few as 28 per cent buyers. 70 per cent of the compulsive home buyers are not even sure of any appreciation potential in the next few years.

However, notwithstanding the list of complaints and woes, realtors are hoping for a booking windfall, something that will prove to be the beginning of realty market coming right on track after a couple of years of gloom. After all, Akshaya Tritiya is the festival which promises good luck and success in all the projects and ventures one invests in on this day. Akshay Tritiya is the second best time of the year after the Navratri to buy your home. This is a day of sentimental value and religious connect and over the years the importance of this day to real estate has only increased.

Lalit Kumar Jain, President of industry body CREDAI and CMD of Kumar Urban Developers laments that in the Mumbai property market for last 15 months not many approvals have been given by the Municipal Corporation which has resulted in a massive choke of demand and supply which have made housing costs go up. The market has been waiting for some time and the patience of prospective buyers have been tested for a long time, which have affected the cyclic motion in the Mumbai property market, he says.

“With interest rates on home loan reducing over time, we are hopeful to get a bit of improvement in the property market in the times to come. While the North Indian property market has boosted up and showed its growth in the last quarter, in the West Indian property market demand has always been more than the supply and with Akshay Tritiya considered as one of the good days to invest in home and gold, we reckon that the market will see a surge by that time. One finds many project launches on Akshay Tritiya wherein the day while not affecting the complete real estate market will certainly see an upward movement in the sales. This Akshay Tritiya we are optimist for the smiles which can come back in the property market with the oncoming surge in mind,” says Jain.

Atul Modak, Head of Kohinoor City agrees that the housing loan rate cut is one positive aspect in property market, but has his reasons to believe that all is not well in Mumbai property market. He believes the market sentiments are the effect of overall conditions in the market. The changes in DCR, along with additional burden of service tax and VAT had a compounding effect in increased property prices in Mumbai. The increased cost of construction has pushed further the property prices which may affect the market sentiment.

“The Mumbai market has always been different from rest of India. With very less chance to expand horizontally due to peculiar geographical settings, the only way to go is vertical. Again being governed by so many regulations from various authorities like BMC, CRZ, Environment ministry, etc. the property market behaves accordingly. The Projects with strategic location and connectivity with value for money will see more transactions. Moreover there will be more preference to ready possession properties than under construction,” says Modak.

Property market analysts believe that the worst hit micro markets will now invite lot of traction and see the revival in demand. Moreover, mid segment housing will see more transaction than big ticket projects. For the last several years, many Gujarati migrants consult astrologers and Vastu Pandits before buying their properties. And with Akshay Tritiya being considered as a bright, fortunate and prosperous day for home acquisitions, they usually wait for Akshay Tritiya for either booking or possession of the property.

However, everyone in Mumbai property agrees that the first time home buyers are more sentimental about festive timing to buy property than second home buyers or investors who have become matured to look for right opportunity than right time. First time buyers have a lot of attachment and sentiments related to buying of a new house. Buying one’s own house is a big dream and when that day arrives people take lot of precautions to see that everything is perfect. Choosing a particularly auspicious day is therefore a priority to most.