14 , May , 2020
Many of the first time homebuyers must be considering 2020 as the year of their home purchase but right then, the deadly Covid-19 arrived, rolling over signs and massacring best-laid plans by the millions.
Amidst this lockdown, with all the home buying plans being massacred, the home buyers are left with no option but to sit at home and deferring their decision till the lock down is lifted. The reason is obvious, and that is due to speculations in the market or risk pertaining to economic conditions.
Having said that, the fact of the matter remains same that the timing of a property purchase is always a subjective matter. When considering the price you are comfortable committing to, it’s always a good idea to determine your intention for buying the property. Do you intend purchasing a family home, or are you buying an investment property? Understanding the intention behind the purchase is the first step in assessing what a fair value offer would be.
Property valuations are often guided by what other similar properties in that area have sold for in recent times. Ultimately, however, the final price will be determined by what the buyer is willing to pay and what the seller is willing to accept.
It is evident that you have identified a specific property you would like to purchase. That said, you now need to assess what impact this pandemic and the lockdown would have on the seller as well as the property market in general.
Property prices have fallen substantially in the past, and you will need to evaluate whether you offer represents a value that is near the bottom end of what the seller could reasonably expect to receive for their property. Even if the property market suffers further declines due to the extended lockdown, the seller may reach a purchase price below which they are not willing to accept, or simply cannot afford to accept.
As per the Sources, one home-grown property brokerage firm claimed it had sold properties worth Rs. 252 crore since the lockdown through digital transactions while another firm said that it had "sold properties worth Rs. 400 crore during the lockdown period in the month of March".
Magicbricks PropIndex revealed that consumer searches had witnessed a 5.3 percent growth during the first quarter of 2020 and that there was strong demand for small size and ready-to-move-in units.
Therefore, in order to know the exact scenario, We interacted with the developers to know what they opine about buying a property during this Pandemic, who all can be the prospective buyers, what can be the possible scope of negotiation and how will be the Realty market poised post Lockdown. Here are the Excerpts:
Dr. Niranjan Hiranandani - National President – NAREDCO
While commenting on the RERA webinar conducted by NAREDCO recently, which discussed an array of issues spanning during the unprecedented crisis and comeback measures to grapple the disruption after new normalcy, he said, “Industry appreciates the empathetic approach of RERA chiefs in understanding the grim situation and willingness to fight rightly in the mutually agreed direction. From the RERA regulatory aspects the key concern issue of extension of force majeure clause, provision of long cheap credit as working capital need to restart the projects, quick partial lifting of lockdown to permeate construction workers on site to re-function in completing pre-monsoon work were leading the platform. The RERA officials in concurrence to the industry demand of periodic reduction of ready reckoner/circle rate and stamp duty along with passing on GST cut benefits to the end users to generate consumption. These are the kick start measures imperative to start the ball rolling for the next big employment generator industry whose revival dominance is inevitable for Economic- GDP growth of the country.
“Housing being the quintessential need of human beings and shortage of houses in India can be met by the demand shocks to drive consumption economy. The pain staking issues of industry need to be addressed for contingency and backup business continuity plan for sustainability, survival which will lead to the gradual revival”, he added further.
Sanchit Bhutani, Chief Financial Officer, Bhutani Group
According to reports “This is the best time to invest as the rates are on a downward trajectory. There will always be demand for commercial space, so for better yield, now is the time to buy”. The only consideration for a prospective buyer should be to ensure that the developer has delivered projects in the past. There can be three categories of prospective buyers
1. Buyers who have evaluated the properties, trust the developer and see it as an opportunity to close a good deal.
2. Non-resident Indians who could benefit from currency depreciation. The depreciation of rupee against the dollar makes real estate the most sensible investment at the moment.
3. Investors who are looking for long term assets and higher returns over time.
When asked about the scope of negotiation, he stated, “There is scope for a great deal of negotiation during this lockdown. However, it also depends on many other factors - the property, trustworthiness of the builder and their expectations. There is a greater potential for negotiation if the project is an older project with unsold remnant units”.
Sharing about the possible post lockdown scenario, he said, “While the housing sector has seen stagnant for a while and hence there is possibility of up to 30% reduction in prices in housing sales. However, the volumes of office spaces increased at an impressive 27% year-on-year in 2019, according to a Knight Frank report. This was a great indicator for business growth in the economy. However, with the changing scenario, while the demand may take a fall immediately, this can’t be perceived as a threat for the demand in office spaces in the future. In spite of remote working, nothing can replace the human connection that matters in collaboration and thus impacts both productivity as well as the mental health of the employees. As the lockdown ends, there is a great possibility for higher demand for office spaces”.
Amit Modi, Director, ABA Corp and President (Elect), CREDAI Western UP
The property prices are currently at their lowest with no substantial increase in last many years with no further scope of correction, add to that the fact the best possible interest rates also available from banks. Once the lockdown gets lifted, there may be a possibility of spike in prices due to the increase in cost of raw materials etc.
Every developer plans their profit margins distinctively for each project, price correction, as it is only expected at an individual level and that too in the premium segment with prices adjustment of up to 5-10% maximum, that too on case to case basis. In terms of the sector, it is indeed the most opportune moment for Homebuyers across the spectrum.
Prateek Mittal, Executive Director, Sushma Group
Interest rates and growth of real estate sector have always had a strong correlation. With the Reserve bank of India sharply reducing the repo rate by 75 bps, the home loan interest rates of major banks have come down to as low as 7.2%. This will act as a strong boost to the real estate sector.
If we look at the trends of the repo rate in 2004 the rate was close to 4.5% and we saw a huge boom in the real estate market, in 2010 also the repo rate was close to 4.3% and we saw the growth in the market. The repo rates touched the level of 8 to 9% in the years between 2011 & 2016. Now the repo rate has again come down to 4.4% to which we feel is strong signal for forthcoming growth of real estate sector.
Tejpreet Singh Gill, Executive Director, Gillco Group
For a long we have been waiting for the banks to transfer the benefits of the rate cut by RBI to the end customers, now this move has come at the right time amidst Covid-19 crisis which has shook the entire world.
This is the kind of booster the real estate sector needed. With this, the interest rates on home loans have plummeted to around 7.5% which will provide an impetus to the sector by easing the EMI burden off the shoulders of people and post Covid-19 it will lend long term benefits to the sector by encouraging more people to invest in the sector.
Satish Gupta, Managing Director, GBP Group
Post RBI's announcement of Repo Rate cut, now banks & financial institutions have started reducing the interest rates. Low-interest rates will reduce the EMIs resulting in buyer getting attracted towards investing in real estate.
In fact, we have been regularly getting telephonic and online queries, which will further increase once the lockdown is over. The sales graph will definitely go northward and the sector is expected to see a boom riding high on the fact that real estate has emerged as a secure investment options.
The Crux
The deficit demand in the market clubbed with reduction in the Repo rate by the RBI will definitely boost the demand for Real Estate. Moreover, clever and wise end users/investors observing the current market will testify buying of real estate during lock down to be the smartest move.
